MidMan, Inc. is a distributor that enters into a contract in January 2020 with the manufacturer of Product B. Under the contract, MidMan receives a performance bonus of $800,000 at the end of 2020 if MidMan achieves a milestone of purchasing $5 million of Product B from the manufacturer by December 31, 2020. Historically, the probability of achieving the milestones required to earn the annual bonus has been 100% and MidMan has achieved milestones and received performance bonuses from the manufacturer with respect to similar contracts performed previously. a. What should MidMan do with the $800,000? b. If MidMan should recognize the $800,000, how and when should it be recognized? c. How much revenue will have been recognized by February 29, 2020?

MidMan, Inc. is a distributor that enters into a contract in January 2020 with the manufacturer of Product B. Under the contract, MidMan receives a performance bonus of $800,000 at the end of 2020 if MidMan achieves a milestone of purchasing $5 million of Product B from the manufacturer by December 31, 2020. Historically, the probability of achieving the milestones required to earn the annual bonus has been 100% and MidMan has achieved milestones and received performance bonuses from the manufacturer with respect to similar contracts performed previously. a. What should MidMan do with the $800,000? b. If MidMan should recognize the $800,000, how and when should it be recognized? c. How much revenue will have been recognized by February 29, 2020?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter17: Advanced Issues In Revenue Recognition

Section: Chapter Questions

Problem 6P

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