Question

Rocky Guide Service provides guided 1-5 day hiking tours throughout the Rocky Mountains. Wilderness Tours hires Rocky to lead various tours that Wilderness sells. Rocky receives $1,300 per tour day, and shortly after the end of each month Rocky learns whether it will receive a $130 bonus per tour day it quided during the previous month if its service during that month received an average evaluation of excellent" by Wilderness customers. The $1,300 per day and any bonus due are paid in one lump payment shortly after the end of each month. • On July 1, based on prior experience, Rocky estimated there is a 40% chance it will earn the bonus for July tours. It guided a total of 10 days from July 1-July 15. • On July 16, based on Rocky's view that it had provided excellent service during the first part of the month, Rocky revised its estimate to an 90% chance it would earn the bonus for July tours. Rocky also guided customers for 15 days from July 16- July 31 . On August 5 Rocky learned it did not receive an average evaluation of excellent for its July tours, so it would not receive any bonus for July, and received all payment due for the July tours. Rocky bases estimates of variable consideration on the expected value it expects to receive Required: 1. to 3. Prepare the journal entries to record the transactions above. (If no entry is required for a transaction/event, select "No Journal entry required in the first account field.) View transaction list Journal entry worksheet 1 2 3 4 Prepare Rocky's July 15 yumal try to record revenue for from July ! July is Net Date bit Credit

Answer 1

Answer -

Step - ( 1 ) - Information Given -

Rocky Guide Service provides guided 1–5 day hiking tours throughout the Rocky Mountains.

Rocky receives $1300 per tour day, and shortly after the end of each month Rocky learns whether it will receive a $130 bonus per tour day it guided during the previous month if its service during that month received an average evaluation of "excellent" by Wilderness customers.

The $1300 per day and any bonus due are paid in one lump payment shortly after the end of each month.

*	On July 1, based on prior experience, Rocky estimated that there is a 40% chance that it will earn the bonus for July tours. It guided a total of 10 days from July 1–July 15.
*	On July 16, based on Rocky’s view that it had provided excellent service during the first part of the month, Rocky revised its estimate to an 90% chance it would earn the bonus for July tours. Rocky also guided customers for 15 days from July 16–July 31.
*	On August 5, Rocky learned that it did not receive an average evaluation of “excellent” for its July tours, so it would not receive any bonus for July, and received all payment due for the July tours.

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Step - ( 2 ) - Journal of Rocky Guide Service

Date	Particulars	Debit ($)	Credit ($)
July 15	Accounts receivable Service revenue ( Recorded revenue for tours given from July 1 - July 15 ) [( $1300 per tour day * 10 days) = $13000 ]	13000 -	- 13000
July 31	Accounts receivable [ $1300 per tour day * 15 days ] Bonus receivable [ $130 per tour day * 25 days ] Service revenue ( Recorded revenue for tours given from July 16 - July 31 and adjusted for bonus receivable for July 1 - July 15 )	19500 3250 -	- - 22750
August 05	Cash Accounts receivable ( Payment received from Wilderness ) [( $1300 per tour day * 25 days) = $32500 ]	32500 -	- 32500
August 05	Service revenue Bonus receivable ( Bonus receivable adjusted ) [( $130 per tour day * 25 days) = $3250 ]	3250 -	- 3250
Total		71500	71500