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On January 1, 2017, Fulton Inc. enters into a contract with Gibson to deliver goods. Gibson pays $100,000 at the time the contract is signed,
On January 1, 2017, Fulton Inc. enters into a contract with Gibson to deliver goods. Gibson pays $100,000 at the time the contract is signed, at which time the goods are transferred and Fultons performance obligation is complete. In addition, Gibson agrees to pay Fulton $100,000 on December 31, 2017, and December 31, 2018. If Fulton entered into a financing arrangement with Gibson it would charge an interest rate of 9%.
Required:
1. | Determine the transaction price for the contract with Gibson. |
2. | Prepare the journal entries to record Fultons 2017 sales revenue and interest revenue. |
3. | Next Level What is the objective of adjusting the transaction price to reflect the time value of money? |
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