Circuit Fitness (CF) sells customized exercise equipment to fitness centers. On February 2nd, 2022, the sales manager for CF obtained a signed contract from Suburban Fitness Center (SFC) for all of the equipment for their new fitness center. The new fitness center is currently in the design stage and has a projected opening date of March 15, 2022. The contract requires CF to deliver the equipment on March 1, 2022. The contract specifies that the SFC will pay $300,000 for the equipment on March 31, 2023. The amount of interest on similar projects for this time period equates to $27,000. CF has significant experience in these types of transactions and a significant revenue reversal is not expected to occur. Will the interest be incorporated into the transaction price (yes/no) If the interest is incorporated into the price will the company recognize interest expense or interest income? c. What is the transaction price?
Circuit Fitness (CF) sells customized exercise equipment to fitness centers. On February 2nd, 2022, the sales manager for CF obtained a signed contract from Suburban Fitness Center (SFC) for all of the equipment for their new fitness center. The new fitness center is currently in the design stage and has a projected opening date of March 15, 2022. The contract requires CF to deliver the equipment on March 1, 2022.
The contract specifies that the SFC will pay $300,000 for the equipment on March 31, 2023.
The amount of interest on similar projects for this time period equates to $27,000. CF has significant experience in these types of transactions and a significant revenue reversal is not expected to occur.
- Will the interest be incorporated into the transaction price (yes/no)
- If the interest is incorporated into the price will the company recognize interest expense or interest income?
c. What is the transaction price?
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