Dealer Financing On 1/1/X1, Tractor Co. sold a new combine toJim’s U-Pick farm. The purchase agreementestablishes a base price of $100,000, plusa contractual interest rate of 5%, payable in 48monthly installments of $2,302.93.Control of the combinetransferred to Jim when Jim signed thecontract and had the combine delivered that same day. IfJim had obtained separate financing (say, a bank loan) for thepurchase, his interest rate would have been6%.
What amount of revenue should Tractor Co.record at the date of sale? Whatguidance should Tractor Co. apply to thesubsequent measurement of its receivable?
Consider the measurement attribute used to record Tractor Co.’srevenues. How does this approach achieve the objective ofthis measurement attribute?
Hint: You might find it useful to use Microsoft Excel’s formulaoptions: PMT and PV for this example. Excel walks you through howto input numbers into each formula.
