In celebration of its 100th anniversary, Jordans Furniture offered customers the following choice:

1. take 15% off the list price of all furniture

OR

2. take 72 months to pay with no interest

Lets assume that on April 1, Susan bought and had delivered a couch with a list price of $2,520. She

opted for the no interest option, agreeing to make 72 monthly payments of $35 each.

You initially thought that Jordans should record $2,520 of sales revenue on April 1 because:

* revenue is earned when you provide a good or service.

* April 1 is the day Susan bought the couch and the day it was delivered to her.

* $2,520 is the amount of Susans obligation to the store.

However, a friend of yours, who had successfully completed ECON 127, disagrees with you.

According to your friend, only $2,142 should be recorded as sales revenue on April 1, with the

remaining amount recorded in some other-named revenue account over the next 72 months.

1. What would your friend say it cost Susan to choose the no interest financing?

2. To what other-named revenue account would your friend be referring?

3. Explain why your friends answer is consistent with the principle that revenue is earned when you

provide a good or service.