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On January 1, year 2, Dell, Inc. contracted with the city of
Little to provide custom built desks for the city schools. The
contract made Dell the city’s sole supplier and required Dell to
supply no less than 4,000 desks and no more than 5,500 desks per
year for two years. In turn, Little agreed to pay a fixed price of
$110 per desk. During year 2, Dell produced 5,000 desks for
Little. At December 31, year 2, 500 of these desks were segregated
from the regular inventory and were accepted and awaiting
pickup by Little. Little paid Dell $450,000 during year 2. What
amount should Dell recognize as contract revenue in year 2?