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30 January, 03:34

On January 1, Year 1, Sam Co. entered into a contract with a customer to sell a machine for two annual payments of $144,049 starting at the end of Year 1. The customer obtains control of the machine at contract inception. The cash selling price of the machine is $250,000. Sam determined that (1) the contract includes a significant financing component and (2) the contract includes an implicit interest rate of 10%. What amounts of revenue and interest income from this contract, if any, were recognized by Sam in Year 2?

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  1. 30 January, 05:01
    0
    interest revenue 13,095.1

    Explanation:

    We will calcualte the loan interest:

    first year

    machine value x interest rate = interest revenue first year

    250,000 x 10% = 25,000 interest revenue for the first year

    cuota - interest = amortization

    144,049 - 25,000 = 119.049‬ amortization

    carrying value

    250,000 - 119,049 = 130.951‬

    second year

    carrying value x interest

    130,951 x 10% = 13,095.1 interest revenue for the second year

    amortization

    144,049 - 13,095.1 = 130.953,9

    For the second year, the interest revenue will be of 13,095.1
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