Question

Problem 5-6 Variable consideration; change of estimate (LO5-3, 5-6 ] Since 1970, Super Rise, Inc., has provided maintenance services for elevators. On January 1, 2018, Super Rise obtains a contract to maintain an elevator in a 90-story building in New York City for 10 months and receives a fixed payment of $94,000. The contract specifies that Super Rise will receive an additional $47,000 at the end of the 10 months if there is no unexpected delay, stoppage, or accident during the year. Super Rise estimates variable consideration to be the most likely amount it will receive. Required: 1. Assume that, because the building sees a constant flux of people throughout the day, Super Rise is allowed to access the elevators and related mechanical equipment only between 3am and 5am on any given day, which is insufficient to perform some of the more time-consuming repair work. As a result, Super Rise believes that unexpected delays are likely and that it will not earn the bonus. Prepare the journal entry Super Rise would record on January 1. 2. Assume instead that Super Rise knows at the inception of the contract that it will be given unlimited access to the elevators and related equipment each day, with the right to schedule repair sessions any time. When given these terms and conditions, Super Rise has never had any delays or accidents in the past. Prepare the journal entry Super Rise would record on January 31 to record one month of revenue. 3. Assume the same facts as requirement 1. In addition assume that, on May 31, Super Rise determines that it does not need to spend more than two hours on any given day to operate the elevator safely because the client's elevator is relatively new. Therefore, Super Rise believes that unexpected delays are very unlikely. Prepare the journal entry Super Rise would record on May 31 to recognize May revenue and any necessary revision in its estimated bonus receivable.

Answer 1

Answeg Page No ① o wewenal erting one want to removed count collection:- Date Account title Debit | Credit casos $94000 Deterred srevenue $94000 اله © Wu Wu Journal conting to record service performed one meanings Ddovred revendie - 94000 tomonths = $9400 Bonus receivedle = 44000 10 months = $4700 Service revenire = 9400 + 4700 $14100 Does Account title Debit Credit Jan 31 Deferred revenue $9400 $ 4700 Bonus receivable Service revenue $14100

Page No ③ Fournal enliy to record service performed on Maye! © MM WW w w Deberred orevenue = 94000 10 months = $9400 Net bonus receivable - 47000 10 months x 5 months for Jani to May.) - 5 months 4400 x 5 3500 Service revenue = 9400 + 23500 = $32900 Account title Debit . Gedit Deberred revenue Bonus receivable Service revenue $9400 $ 23500 $32900

Answer 2

Answeg Page No ① o wewenal erting one want to removed count collection:- Date Account title Debit | Credit casos $94000 Deterred srevenue $94000 اله © Wu Wu Journal conting to record service performed one meanings Ddovred revendie - 94000 tomonths = $9400 Bonus receivedle = 44000 10 months = $4700 Service revenire = 9400 + 4700 $14100 Does Account title Debit Credit Jan 31 Deferred revenue $9400 $ 4700 Bonus receivable Service revenue $14100

Page No ③ Fournal enliy to record service performed on Maye! © MM WW w w Deberred orevenue = 94000 10 months = $9400 Net bonus receivable - 47000 10 months x 5 months for Jani to May.) - 5 months 4400 x 5 3500 Service revenue = 9400 + 23500 = $32900 Account title Debit . Gedit Deberred revenue Bonus receivable Service revenue $9400 $ 23500 $32900