Dealer Financing On 1/1/X1, Tractor Co. sold a new combine to Jim’s U-Pick farm. The purchase...

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Dealer Financing On 1/1/X1, Tractor Co. sold a new combine toJim’s U-Pick farm. The purchase agreementestablishes a base price of $100,000, plusa contractual interest rate of 5%, payable in 48monthly installments of $2,302.93.Control of the combinetransferred to Jim when Jim signed thecontract and had the combine delivered that same day. IfJim had obtained separate financing (say, a bank loan) for thepurchase, his interest rate would have been6%.
What amount of revenue should Tractor Co.record at the date of sale? Whatguidance should Tractor Co. apply to thesubsequent measurement of its receivable?
Consider the measurement attribute used to record Tractor Co.’srevenues. How does this approach achieve the objective ofthis measurement attribute?
Hint: You might find it useful to use Microsoft Excel’s formulaoptions: PMT and PV for this example. Excel walks you through howto input numbers into each formula.

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1 What amount of revenue should be recorded at the date of sale ASC 606103215 requires that Tractor Co shall adjust the promised amount of consideration for the effects of the time value of money if the timing of payments agreed to by the parties to the contract provides the customer or the entity with a significant benefit of financing the transfer of goods or services to the customer Tractor Co is providing significant benefit to the customer Jim by receiving payment after performance ASC 606103216 provides guidance on how to recognize revenue with the adjustment The objective when adjusting the promised amount of consideration for a significant financing component is for an entity to recognize revenue at an amount that reflects the price that a customer would have paid for the promised goods or services if the customer had paid cash for those goods or services when or as they transfer to the customer that is the cash selling price An entity shall consider all relevant facts and circumstances in assessing whether a contract contains a financing component and whether that financing component is significant to the contract including both of the following a The difference if any between the amount of promised consideration and the cash selling price of the promised goods or services b The combined effect of both of the following 1 The expected length of time between when the entity transfers the promised goods or See Answer

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