Lux Hotels, Inc. has signed a service outsourcing contract with Deluxe Rooms, Inc. for $3 million, which was received in cash at contract inception. Under the agreement, Deluxe Rooms is obligated to clean and prepare over 5,000 hotels rooms managed by Lux Hotel on a daily basis from August 1, 2018 to July 31, 2019.
Required:
Prepare any journal entry that Delux would record:
(1) at inception of the contract and
(2) at the end of 2018 to recognize all revenue associated with this contract that should be recognized in 2018.

Question

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The Answer of Lux Hotels, Inc. has signed a service outsourcing contract with Deluxe Rooms, Inc. for $3 million, which was received in cash at contract inception. Under the agreement, Deluxe Rooms is obligated to clean and prepare over 5,000 hotels rooms managed by Lux Hotel on a daily basis from August 1, 2018 to July 31, 2019.
Required:
Prepare any journal entry that Delux would record:
(1) at inception of the contract and
(2) at the end of 2018 to recognize all revenue associated with this contract that should be recognized in 2018.