Sawyer Beaver Transmission Company enters into a contract with a major U$.$S$.$ auto manufacturer to design and produce four$-$speed transmissions for small SUVs. Under the terms of the cor Sawyer Beaver will deliver the transmission immediately but the auto manufacturers will defer payment for six years, the end of the life of the base warranty. The contract price is $$3,900,000$ a interest rate incurred on similar financing agreements in the industry is $12\%.$

Read the requirements.

Future Value of $$1$ table Future Value of an Ordinary Annuity table Future Value of an Annuity Due table

Present Value of $$1$ table Present Value of an Ordinary Annuity table Present Value of an Annuity Due table

Requirement a$.$ Is there a significant financing component in this contract?

A$.$ A significant financing component exists because the contract price is in excess of $$1,000,000,$ creating a need to record interest.

B$.$ A significant financing component does not exist because a valid contract is signed and the interest rate is based on the industry rate at $12\%.$

C$.$ A significant financing component exists because the time period from payment to delivery is six years and the interest rate is $12\%.$

D$.$ A significant financing component does not exist because the time period from payment to delivery is six years and the interest rate is $12\%.$

Requirement $b.$ If there is a significant financing component, determine the amount of sales revenue and interest revenue to be recognized by Sawyer Beaver. $($Use the present value and future value tables, a financial calculator, or a spreadsheet for your calculations. If using present and future value tables, use factor amounts rounded to five decimal places, X$.$XXXXX$.$ Round your final answer to the nearest whole dollar.$)$

Sawyer Beaver will record $$ as sales revenue $]$ and will recognize interest revenue of over the six$-$year period.