IBM sold a mainframe computer to its customer for 60 monthly payments of $92,082 61, which totals $5,524,956 60 IBM also agreed to provide installation and training for the customer for no additional charges According to the agreement the customer is not required to use IBM for installation and training IBM estimated that the standalone installation and training sales prices are $50,000 and $68,000, respectively IBM used a 4 annual interest rate in determining the 60 monthly payments The customer decided to have IBM install and train its employees and IBM delivered the computer on July 1 and completed installation on October 31 Training will take place over the next 12 months The date of delivery starts the customer's payment obligation to IBM and IBM's year end is December 31 What date may IBM recognize revenue from this transaction 1 point What is the total revenue amount and the related revenue component amounts IBM may recognize on the date specified in answer A You must show your work for credit 7 points How much interest income (revenue) will IBM recognize in its December 31 regular income statement from this transaction Hint Set up the amortization schedule of the sales price You must show your work for credit 2 points

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Sep 20, 2024

IBM sold a mainframe computer to its customer for 60 monthly payments of $92,082.61, which totals $5,524,956.60. IBM also agreed to provide installation and training

IBM sold a mainframe computer to its customer for 60 monthly payments of $92,082.61, which totals $5,524,956.60. IBM also agreed to provide installation and training for the customer for no additional charges. According to the agreement the customer is not required to use IBM for installation and training. IBM estimated that the standalone installation and training sales prices are $50,000 and $68,000, respectively. IBM used a 4% annual interest rate in determining the 60 monthly payments. The customer decided to have IBM install and train its employees and IBM delivered the computer on July 1 and completed installation on October 31. Training will take place over the next 12 months. The date of delivery starts the customer's payment obligation to IBM and IBM's year end is December 31.
1. What date may IBM recognize revenue from this transaction [1 point]
2. What is the total revenue amount and the related revenue component amounts IBM may recognize on the date specified in answer A? [You must show your work for credit.] [7 points]

How much interest income (revenue) will IBM recognize in its December 31 regular income statement from this transaction? [Hint: Set up the amortization schedule of the sales price. You must show your work for credit.] [2 points]