You are a manufacturer of steel products and are a publicly accountable entity. On December

31, 20x0, you made a sale of a piece of steel product to a customer. You estimate that your

customers incremental borrowing rate is 6%. Your incremental borrowing rate is 5%.

Required

For each of the following terms of payment, prepare the journal entries for this transaction for

the years ended December 31, 20x0, 20x1 and 20x2.

a) The customer will pay $400,000 on December 31, 20x2 and will pay interest of 6% on

the $400,000 on December 31, 20x1 and 20x2.

b) The customer will pay $400,000 on December 31, 20x2 and pay no interest in the

interim.

c) The customer will pay $400,000 on December 31, 20x2 and will pay interest of 2% on

the $400,000 on December 31, 20x1 and 20x2.

d) The customer will pay equal payments of principal and interest over 4 years with the first

payment made on December 31, 20x1. The nominal value of the principal at December

31, 20x0 is $400,000. The interest charged is 3%.

e) The customer will pay $400,000 on December 31, 20x2 and pay no interest in the

interim. The cash sales price of the turbine would be $350,000.

f) Repeat part (d) on the assumption that you are a private enterprise subject to ASPE and

you wish to use the straight-line method.