The following information applies to the questions displayed below On July 1. Wi
ID: 2592045 • Letter: T
Question
The following information applies to the questions displayed below On July 1. Wiggins Associates enters into a contract to provide consultung services to Pennsylvania University (PU) contract is anticipated to last four months and is intended to achieve significant cost savings at the untversity. The contract that PU will pay Wiggins $43.000 at the end of each month, and. If total cost savings reach a spectfic target, Pu Will pay an addnional $38,000 to Wiggins at the end of the contract. Wiggins estimates a will reach the target Assume that Wiggins estmates uncertain consideration as the most likely amount Required Do the following for Wiggins a. Prepare the journal entry on July 31 to record the first month of revenue under the contract b. Assuming total cost savings exceed the target, prepare the journal entry. f any, on October 31 to bonus (ignore the normal October payment of $43.000) e Asuming total cost savings do not reach the target prepare theJournal entry, f any.on October 3 to record faiture to receve the record recelpt of the $38,000 $38,000 bonus ignore the normal October payment of $43.000) (Forall requirements t no entry is required for a transactionievent selectNo journal entry required" in the first account field.) View tronsection Teil Journal entry worksheet
Explanation / Answer
Each month will recognize revenue = $202,400 / 4
.........................................................= $50,600
Journal entries
Possible Price Probability Expected Amount $210,000 ($43,000 x 4 + $38,000) 80% $168,000 $172,000 ($43,000 x 4) 20% $34,400 Expected Value $202,400Related Questions
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