Palantir Corp. sells specialized equipment to the healthcare industry. Palantir pays its sales agents a salary plus a 5% commission on sales. Sales agents employed by the company sold 10 Osgilith MRI machines that were delivered and installed in January 2017. The MRI machine sells for $45,600 due at the end of 12 months. Alternatively, customers may elect to pay $40,000 at delivery and installation. All customers purchasing machines during January elected to pay at the end of the 12-month period.

Required:

1. Determine the transaction price of the Osgilith MRI machines, and discuss how Palantir would account for the sales commission.

2. Discuss whether the delayed payment contract contains a significant financing component.

3. Prepare the journal entries for 2017 for the Osgilith MRI machines sold by Palantir to customers who elect the delayed payment option.

4. Prepare the 2017 journal entries that Palantir would make for the 10 Osgilith MRI machines that are sold if customers elect to pay at delivery.

CHART OF ACCOUNTS

Palantir Corp.

General Ledger

ASSETS

111 Cash

121 Accounts Receivable

141 Inventory

152 Prepaid Insurance

153 Prepaid Sales Commission

181 Equipment

198 Accumulated Depreciation

LIABILITIES

211 Accounts Payable

231 Salaries Payable

250 Unearned Interest

261 Income Taxes Payable

EQUITY

311 Common Stock

331 Retained Earnings

REVENUE

411 Sales Revenue

431 Interest Income

EXPENSES

500 Cost of Goods Sold

511 Insurance Expense

512 Utilities Expense

521 Salaries Expense

523 Sales Commission Expense

532 Bad Debt Expense

540 Interest Expense

541 Depreciation Expense

559 Miscellaneous Expenses

910 Income Tax Expense

Prepare the journal entries for 2017 for the Osgilith MRI machines sold by Palantir to customers who elect the delayed payment option. Additional instructions

Prepare four entries to record sales and commissions on January 1, and cash received on account and interest earned for the year on December 31.

Question not attempted.

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GENERAL JOURNAL

Score: 0/113

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Solution

DATEACCOUNT TITLEPOST. REF.DEBITCREDIT1

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Points:

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Prepare the 2017 journal entries that Palantir would make for the 10 Osgilith MRI machines that are sold if customers elect to pay at delivery on January 1.

GENERAL JOURNAL

DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT

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DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT

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