Reference no: EM132497187
Katoby Associates provides consulting services to Connor to help them realize increased sales. The four month contract, dated July 1st, requires Connor to pay Katoby $25,000 at the end of each month. In addition, Connor will pay an additional $20,000 to Katoby at the end of the contract, if certain sales targets are achieved. Katoby estimates a 75% chance that sales will reach the target.
Question a. Prepare the journal entry on July 31 to record the first month of revenue under the contract.
Question b. Assuming total sales exceed the target, prepare the journal entry, if any, on October 31 to record receipt of the $20,000 bonus (ignore the normal October payment of $25,000).
Question c. Assuming total sales do not reach the target, prepare the journal entry, if any, on October 31 to record failure to receive the $20,000 bonus (ignore the normal October payment of $25,000).
Question d. Prepare the journal entry on July 31 to record the first month of revenue under the contract.
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