Question

Romano Services provides room-cleaning arrangements for hotels. On April 1, Swanky Hotels & Resorts signed an agreement to outsource its room cleaning functions to Romano. The contract specifies the service fee to be $45,000 per month, and all payments are to be made shortly after the end of each quarter. It also specifies that Romano will receive an additional quarterly bonus of $6,000, if during that quarter, Swanky receives no more than five complaints from customers about room cleanliness. • On April 1, based on historical experience, Romano estimated that there is a 75% chance that it will earn the quarterly bonus. • On May 5, Romano learned that, during March, there were two complaints from customers related to room cleanliness. Based on this new information, Romano revised its estimate downward to 40% that it would earn the quarterly bonus. • On June 30, Swanky notified Romano that, for the quarter ended, there were four complaints associated with room cleanliness, so Romano would receive the bonus. Two days later, Romano received all payments due for all services rendered in the second quarter, including the bonus Romano estimates any variable consideration on the expected value of the consideration it expects to receive. 23. Prepare the required journal entry for Romano Services on April 30th. The entry includes: a. A debit to accounts receivable of $46,500 b. A debit to bonus receivable of $1,500 c. A credit to service revenue of $51,000 d. A credit to bonus receivable of $3,000 e. A debit to bonus receivable of $4,500 f. A debit to bonus receivable of $6,000 g. A credit to deferred revenue of $93,000 h. None of the above 24. Prepare the required journal entry for Romano Services on May 30th. The entry includes: a. A debit to accounts receivable of $45,800 b. A debit to bonus receivable of $1,500 c. A debit to bonus receivable of $800 d. A credit to service revenue of $15,400 e. A credit to bonus receivable of $100 f. A debit to bonus receivable of $100 g. A credit to deferred revenue of $45,800 h. None of the above 25. Prepare the required journal entry for Romano Services on June 30th. The entry includes: a. A debit to bonus receivable of $4,400 b. A debit to accounts receivable of $46,600 c. A debit to bonus receivable of $800 d. A credit to service revenue of $51,000 e. A credit to bonus receivable of $1,600 f. A debit to bonus receivable of $800 g. A credit to deferred revenue of $138,800 h. None of the above Romano Services provides room-cleaning arrangements for hotels. On April 1, Swanky Hotels & Resorts signed an agreement to outsource its room cleaning functions to Romano. The contract specifies the service fee to be $45,000 per month, and all payments are to be made shortly after the end of each quarter. It also specifies that Romano will receive an additional quarterly bonus of $6,000, if during that quarter, Swanky receives no more than five complaints from customers about room cleanliness. • On April 1, based on historical experience, Romano estimated that there is a 75% chance that it will earn the quarterly bonus. • On May 5, Romano learned that, during March, there were two complaints from customers related to room cleanliness. Based on this new information, Romano revised its estimate downward to 40% that it would earn the quarterly bonus. • On June 30, Swanky notified Romano that, for the quarter ended, there were four complaints associated with room cleanliness, so Romano would receive the bonus. Two days later, Romano received all payments due for all services rendered in the second quarter, including the bonus Romano estimates any variable consideration on the expected value of the consideration it expects to receive. 23. Prepare the required journal entry for Romano Services on April 30th. The entry includes: a. A debit to accounts receivable of $46,500 b. A debit to bonus receivable of $1,500 c. A credit to service revenue of $51,000 d. A credit to bonus receivable of $3,000 e. A debit to bonus receivable of $4,500 f. A debit to bonus receivable of $6,000 g. A credit to deferred revenue of $93,000 h. None of the above 24. Prepare the required journal entry for Romano Services on May 30th. The entry includes: a. A debit to accounts receivable of $45,800 b. A debit to bonus receivable of $1,500 c. A debit to bonus receivable of $800 d. A credit to service revenue of $15,400 e. A credit to bonus receivable of $100 f. A debit to bonus receivable of $100 g. A credit to deferred revenue of $45,800 h. None of the above 25. Prepare the required journal entry for Romano Services on June 30th. The entry includes: a. A debit to bonus receivable of $4,400 b. A debit to accounts receivable of $46,600 c. A debit to bonus receivable of $800 d. A credit to service revenue of $51,000 e. A credit to bonus receivable of $1,600 f. A debit to bonus receivable of $800 g. A credit to deferred revenue of $138,800 h. None of the above Romano Services provides room-cleaning arrangements for hotels. On April 1, Swanky Hotels & Resorts signed an agreement to outsource its room cleaning functions to Romano. The contract specifies the service fee to be $45,000 per month, and all payments are to be made shortly after the end of each quarter. It also specifies that Romano will receive an additional quarterly bonus of $6,000, if during that quarter, Swanky receives no more than five complaints from customers about room cleanliness. • On April 1, based on historical experience, Romano estimated that there is a 75% chance that it will earn the quarterly bonus. • On May 5, Romano learned that, during March, there were two complaints from customers related to room cleanliness. Based on this new information, Romano revised its estimate downward to 40% that it would earn the quarterly bonus. • On June 30, Swanky notified Romano that, for the quarter ended, there were four complaints associated with room cleanliness, so Romano would receive the bonus. Two days later, Romano received all payments due for all services rendered in the second quarter, including the bonus Romano estimates any variable consideration on the expected value of the consideration it expects to receive. 23. Prepare the required journal entry for Romano Services on April 30th. The entry includes: a. A debit to accounts receivable of $46,500 b. A debit to bonus receivable of $1,500 c. A credit to service revenue of $51,000 d. A credit to bonus receivable of $3,000 e. A debit to bonus receivable of $4,500 f. A debit to bonus receivable of $6,000 g. A credit to deferred revenue of $93,000 h. None of the above 24. Prepare the required journal entry for Romano Services on May 30th. The entry includes: a. A debit to accounts receivable of $45,800 b. A debit to bonus receivable of $1,500 c. A debit to bonus receivable of $800 d. A credit to service revenue of $15,400 e. A credit to bonus receivable of $100 f. A debit to bonus receivable of $100 g. A credit to deferred revenue of $45,800 h. None of the above 25. Prepare the required journal entry for Romano Services on June 30th. The entry includes: a. A debit to bonus receivable of $4,400 b. A debit to accounts receivable of $46,600 c. A debit to bonus receivable of $800 d. A credit to service revenue of $51,000 e. A credit to bonus receivable of $1,600 f. A debit to bonus receivable of $800 g. A credit to deferred revenue of $138,800 h. None of the above Romano Services provides room-cleaning arrangements for hotels. On April 1, Swanky Hotels & Resorts signed an agreement to outsource its room cleaning functions to Romano. The contract specifies the service fee to be $45,000 per month, and all payments are to be made shortly after the end of each quarter. It also specifies that Romano will receive an additional quarterly bonus of $6,000, if during that quarter, Swanky receives no more than five complaints from customers about room cleanliness. • On April 1, based on historical experience, Romano estimated that there is a 75% chance that it will earn the quarterly bonus. • On May 5, Romano learned that, during March, there were two complaints from customers related to room cleanliness. Based on this new information, Romano revised its estimate downward to 40% that it would earn the quarterly bonus. • On June 30, Swanky notified Romano that, for the quarter ended, there were four complaints associated with room cleanliness, so Romano would receive the bonus. Two days later, Romano received all payments due for all services rendered in the second quarter, including the bonus Romano estimates any variable consideration on the expected value of the consideration it expects to receive. 23. Prepare the required journal entry for Romano Services on April 30th. The entry includes: a. A debit to accounts receivable of $46,500 b. A debit to bonus receivable of $1,500 c. A credit to service revenue of $51,000 d. A credit to bonus receivable of $3,000 e. A debit to bonus receivable of $4,500 f. A debit to bonus receivable of $6,000 g. A credit to deferred revenue of $93,000 h. None of the above 24. Prepare the required journal entry for Romano Services on May 30th. The entry includes: a. A debit to accounts receivable of $45,800 b. A debit to bonus receivable of $1,500 c. A debit to bonus receivable of $800 d. A credit to service revenue of $15,400 e. A credit to bonus receivable of $100 f. A debit to bonus receivable of $100 g. A credit to deferred revenue of $45,800 h. None of the above 25. Prepare the required journal entry for Romano Services on June 30th. The entry includes: a. A debit to bonus receivable of $4,400 b. A debit to accounts receivable of $46,600 c. A debit to bonus receivable of $800 d. A credit to service revenue of $51,000 e. A credit to bonus receivable of $1,600 f. A debit to bonus receivable of $800 g. A credit to deferred revenue of $138,800 h. None of the above Romano Services provides room-cleaning arrangements for hotels. On April 1, Swanky Hotels & Resorts signed an agreement to outsource its room cleaning functions to Romano. The contract specifies the service fee to be $45,000 per month, and all payments are to be made shortly after the end of each quarter. It also specifies that Romano will receive an additional quarterly bonus of $6,000, if during that quarter, Swanky receives no more than five complaints from customers about room cleanliness. • On April 1, based on historical experience, Romano estimated that there is a 75% chance that it will earn the quarterly bonus. • On May 5, Romano learned that, during March, there were two complaints from customers related to room cleanliness. Based on this new information, Romano revised its estimate downward to 40% that it would earn the quarterly bonus. • On June 30, Swanky notified Romano that, for the quarter ended, there were four complaints associated with room cleanliness, so Romano would receive the bonus. Two days later, Romano received all payments due for all services rendered in the second quarter, including the bonus Romano estimates any variable consideration on the expected value of the consideration it expects to receive. 23. Prepare the required journal entry for Romano Services on April 30th. The entry includes: a. A debit to accounts receivable of $46,500 b. A debit to bonus receivable of $1,500 c. A credit to service revenue of $51,000 d. A credit to bonus receivable of $3,000 e. A debit to bonus receivable of $4,500 f. A debit to bonus receivable of $6,000 g. A credit to deferred revenue of $93,000 h. None of the above 24. Prepare the required journal entry for Romano Services on May 30th. The entry includes: a. A debit to accounts receivable of $45,800 b. A debit to bonus receivable of $1,500 c. A debit to bonus receivable of $800 d. A credit to service revenue of $15,400 e. A credit to bonus receivable of $100 f. A debit to bonus receivable of $100 g. A credit to deferred revenue of $45,800 h. None of the above 25. Prepare the required journal entry for Romano Services on June 30th. The entry includes: a. A debit to bonus receivable of $4,400 b. A debit to accounts receivable of $46,600 c. A debit to bonus receivable of $800 d. A credit to service revenue of $51,000 e. A credit to bonus receivable of $1,600 f. A debit to bonus receivable of $800 g. A credit to deferred revenue of $138,800 h. None of the above Romano Services provides room-cleaning arrangements for hotels. On April 1, Swanky Hotels & Resorts signed an agreement to outsource its room cleaning functions to Romano. The contract specifies the service fee to be $45,000 per month, and all payments are to be made shortly after the end of each quarter. It also specifies that Romano will receive an additional quarterly bonus of $6,000, if during that quarter, Swanky receives no more than five complaints from customers about room cleanliness. • On April 1, based on historical experience, Romano estimated that there is a 75% chance that it will earn the quarterly bonus. • On May 5, Romano learned that, during March, there were two complaints from customers related to room cleanliness. Based on this new information, Romano revised its estimate downward to 40% that it would earn the quarterly bonus. • On June 30, Swanky notified Romano that, for the quarter ended, there were four complaints associated with room cleanliness, so Romano would receive the bonus. Two days later, Romano received all payments due for all services rendered in the second quarter, including the bonus Romano estimates any variable consideration on the expected value of the consideration it expects to receive. Prepare the required journal entry for Romano Services on April 30th, May 30th, June 30th

Answer 1

	Journal entries for Romano Services
Date	Description	Debit	Credit
30-Apr	Accounts receivable	$45,000
	Bonus receivable	$1,500
	Service Revenue		$46,500
	(To record revenue earned for April but due)
	(Bonus for 1 month = 6000/3 = $2000 x 75% = $1500)
31-May	Accounts receivable	$45,000
	Bonus receivable	$100
	Service Revenue		$45,100
	(To record revenue earned for May but due)
	Bonus for 2 months = ($2000+$2000) x 40% = $1600
	As $1500 is already recorded last month, this month we will record only $100 (1600-1500)
30-Jun	Accounts receivable	$45,000
	Bonus receivable	$4,400
	Service Revenue		$49,400
	(To record revenue earned for May but due)
	Bonus for 3 months = $6000
	As $1600 is already recorded in last 2 month, this month we will record remaining $4400 (6000-1600)
2-Jul	Cash	$141,000
	Accounts receivable		$135,000
	Bonus receivable		$6,000
	(To record payment received for the quarter)