Big Joes Super Cars, Present Value (Revised Revenue Guidance) Big Joes Super Cars has just sold a luxury car to customer Tim. The purchase contract establishes a base price of $60,000, plus a contractual interest rate of 4%, payable in 60 monthly installments of $1,105. Control of the car transferred to Tim when Tim signed the contract and drove off the lot. If Tim had obtained separate financing (say, a bank loan) for the purchase of the car, his interest rate would have been 6%.

1. What amount of revenue should Big Joes record at the date of sale? What guidance should Big Joes apply to the subsequent measurement of its receivable?

2. Reflect upon what measurement attribute is being used to record Big Joes revenues. How does this approach achieve the objective of this measurement attribute?

This example will require you to perform computations. You might find it useful to use Microsoft Excels formula options: PMT an PV. Excel walks you through how to input numbers into each formula.

3. Write an accounting memo format.