On January 1, Year 1, an entity receives a payment of $20,000 for delivering a product to a customer at the end of Year 3. Based on the contracts terms, the performance obligation will be satisfied at a point in time (upon delivery of the product). The entity determined that (1) the contract includes a significant financing component and (2) a financing rate of 6% is an appropriate discount rate. What amount of interest expense and contract liability will be recognized in the entitys December 31, Year 2, financial statements? Year 2 Interest Expense Contract Liability on December 31, Year 2 Year 2 Interest Expense $2,400 Contract Liability on December 31, Year 2 $22,400

On January 1, Year 1, an entity receives a payment of $20,000 for delivering a product to a customer at the end of Year 3 . Based on the contract's terms, the performance obligation will be satisfied at a point in time (upon delivery of the product). The entity determined that (1) the contract includes a significant financing component and (2) a financing rate of 6% is an appropriate discount rate. What amount of interest expense and contract liability will be recognized in the entity's December 31, Year 2, financial statements