Veras Bus Transportation Provides On-Campus Bus Services for Universities

question 178

Essay

Veras Bus Transportation provides on-campus bus services for universities. On January 1, it enters into a one-year contract with Moose University to operate five bus lines traveling throughout the campus. Under the contract, Veras will be paid $100,000 on the last day of each month. In addition, Veras will receive an additional $120,000 at the end of each six-month period, provided it remains free of accidents.

• On January 1, based on historical experience, Veras estimated that there is a 75% chance that it will remain free of accidents for the entire year.
• On March 20, three of the most senior drivers at Veras abruptly left. As a result, Veras had to hire inexperienced drivers to fill the vacant positions. Consequently, Veras revised its estimate to a 30% chance that it would earn the semiannual bonus.
• On June 30, Moose confirmed that there was no accident between January and June, so Veras would be entitled to the semiannual bonus.

Veras bases estimates of variable consideration on the most likely amount it expects to receive.

-Prepare Veras' June 30 journal entry to account for the revenue earned from June 1 - June 30, as well as any necessary adjustments to revenue presumed to have been previously recorded.

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