Ayayai Ranch & Pina is a distributor of ranch and farm equipment. Its products range from small tools, power equipment for trench-digging and fencing, grain dryers, and barn winches. Most products are sold direct via its company catalog and Internet site. However, given some of its specialty products, select farm implement stores carry Ayayais products. Pricing and cost information on three of Ayayais most popular products are as follows. Item Standalone Selling Price (Cost) Mini-trencher $ 3,200 ($2,200 ) Power fence hole auger 1,200 (700 ) Grain/hay dryer 12,600 (11,600 ) Respond to the requirements related to the following independent revenue arrangements for Ayayai Ranch & Pina. Collapse question part (a) On January 1, 2017, Ayayai sells 30 augers to Mills Farm & Fleet for $36,000. Mills signs a 6-month note at an annual interest rate of 12%. Ayayai allows Mills to return any auger that it cannot use within 50 days and receive a full refund. Based on prior experience, Ayayai estimates that 5% of units sold to customers like Mills will be returned (using the most likely outcome approach). Ayayais costs to recover the products will be immaterial, and the returned augers are expected to be resold at a profit. Prepare the journal entry for Ayayai on January 1, 2017.