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

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

Analysis

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

The transaction price for 10 machines is when customers elect to pay at the end of the 12-month period. Palantir Corp. should recognize revenue upon delivery and installation in the amount of per machine.

In this case, the sales commission is expensed in January when the machines are delivered and installed.

The transaction price is the sell price or the cost to the customer. Revenue is calculated using the different pricing options. The treatment of sales commissions depends on the timing of the performance obligation, or the revenue recognition.

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

Palantir is receiving payment 12 months after the delivery and installation of the equipment, therefore theywill recognize a portion of the $______received as a financing component. The financing component is therefore$5,600 per machine.

General Journal

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 commission on January 1st, and cash received on account and interest earned for the year on December 31st.

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6
7
8
9

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
1
2
3
4