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

ASSETS111Cash121Accounts Receivable141Inventory152Prepaid Insurance153Prepaid Sales Commission181Equipment198Accumulated Depreciation

LIABILITIES211Accounts Payable231Salaries Payable250Unearned Interest261Income Taxes Payable

EQUITY311Common Stock331Retained Earnings

REVENUE411Sales Revenue431Interest Income

EXPENSES500Cost of Goods Sold511Insurance Expense512Utilities Expense521Salaries Expense523Sales Commission Expense532Bad Debt Expense540Interest Expense541Depreciation Expense559Miscellaneous Expenses910Income Tax Expense