On January $1,$ Year $1,$ Fulton Inc. enters into a contract with Gibson to deliver goods. Gibson pays $$100,000$ at the time the contract is signed, at which time the goods are transferred and Fulton's performance obligation is complete. In addition, Gibson agrees to pay Fulton $$100,000$ on December $31,$ Year $1,$ and December $31,$ Year $2.$ If Fulton entered into a financing arrangement with Gibson, it would charge an interest rate of $9\%.$

Required:

Determine the transaction price for the contract with Gibson.

Prepare the journal entries to record Fulton's Year $1$ sales revenue and interest revenue.

Next Level What is the objective of adjusting the transaction price to reflect the time value of money?