CUSTOMER DEPOSITS WITH COMPOUND INTEREST. Indy Racing builds and sells racing versions of sports cars. Indy requires a $30,000 deposit to begin construction on a car. The construction period is 6 months. At the end of the construction period, Indy credits the buyer with the amount of the deposit plus compound interest.

REQUIRED:

1. What entry would Indy make upon receipt of a $30,000 deposit?

2. How much compound interest would Indy credit against the purchase price of a car during the 6-month construction period if 12% interest on the $30,000 deposit was compounded

(a) semiannually,

(b) quarterly,

(c) monthly?

3. What entry would Indy make when construction is completed on a car and $30,000 plus semiannual compound interest at 12% (6% per 6-month period) is credited against the $42,500 purchase price of a car?