Portelli Services provides room-cleaning arrangements for hotels in Pennsylvania. On April 1, Silvia Hotels & Resorts signed an agreement to outsource its room-cleaning functions to Portelli. The contract specifies the service fee to be $15,000 per month, and all payments are to be made shortly after the end of each quarter. It also specifies that Portelli will receive an additional quarterly bonus of $3,000 if, during that quarter, Silvia receives no more than five complaints from customers about room cleanliness.

• On April 1, based on historical experience, Portelli estimated that there is a 75% chance that it will earn the quarterly bonus.
• On May 5, Portelli learned that, during March, there were two complaints from customers related to room cleanliness. Based on this new information, Portelli revised its estimate downward to 40% that it would earn the quarterly bonus.
• On June 30, Silvia notified Portelli that, for the quarter ended, there were four complaints associated with room cleanliness, so Portelli would receive the bonus. Two days later, Portelli received all payments due for all services rendered in the second quarter, including the bonus.

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

-Prepare Portelli's April 30 journal entry to account for the revenue earned in April.

Question

Portelli Services provides room-cleaning arrangements for hotels in Pennsylvania. On April 1, Silvia Hotels & Resorts signed an agreement to outsource its room-cleaning functions to Portelli. The contract specifies the service fee to be $15,000 per month, and all payments are to be made shortly after the end of each quarter. It also specifies that Portelli will receive an additional quarterly bonus of $3,000 if, during that quarter, Silvia receives no more than five complaints from customers about room cleanliness.

•	On April 1, based on historical experience, Portelli estimated that there is a 75% chance that it will earn the quarterly bonus.
•	On May 5, Portelli learned that, during March, there were two complaints from customers related to room cleanliness. Based on this new information, Portelli revised its estimate downward to 40% that it would earn the quarterly bonus.
•	On June 30, Silvia notified Portelli that, for the quarter ended, there were four complaints associated with room cleanliness, so Portelli would receive the bonus. Two days later, Portelli received all payments due for all services rendered in the second quarter, including the bonus.

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

-Prepare Portelli's April 30 journal entry to account for the revenue earned in April.

Quizplus · Accepted Answer

The Answer of Portelli Services provides room-cleaning arrangements for hotels in Pennsylvania. On April 1, Silvia Hotels & Resorts signed an agreement to outsource its room-cleaning functions to Portelli. The contract specifies the service fee to be $15,000 per month, and all payments are to be made shortly after the end of each quarter. It also specifies that Portelli will receive an additional quarterly bonus of $3,000 if, during that quarter, Silvia receives no more than five complaints from customers about room cleanliness.

•	On April 1, based on historical experience, Portelli estimated that there is a 75% chance that it will earn the quarterly bonus.
•	On May 5, Portelli learned that, during March, there were two complaints from customers related to room cleanliness. Based on this new information, Portelli revised its estimate downward to 40% that it would earn the quarterly bonus.
•	On June 30, Silvia notified Portelli that, for the quarter ended, there were four complaints associated with room cleanliness, so Portelli would receive the bonus. Two days later, Portelli received all payments due for all services rendered in the second quarter, including the bonus.

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

-Prepare Portelli's April 30 journal entry to account for the revenue earned in April.

Portelli Services Provides Room-Cleaning Arrangements for Hotels in Pennsylvania