Bill Amends, owner of Flint Estate Inc., buys and sells commercial properties. Recently, he sold land for $ 3,270,000 to the Blackhawk Group, a developer that plans to build a new shopping mall. In addition to the $ 3,270,000 sales price, Blackhawk Group agrees to pay Flint Estate Inc. 1% of the retail sales of the mall for 10 years. Blackhawk estimates that retail sales in a typical mall project is $ 1,060,000 a year. Given the substantial increase in online sales that are occurring in the retail market, Bill had originally indicated that he would prefer a higher price for the land instead of the 1% future sales-based arrangement and suggested a price of $ 3,496,000. However, Blackhawk would not agree to those terms. What is the transaction price for the land and related future sales-based payment that Flint Estate Inc. should record?
Bill Amends, owner of Flint Estate Inc., buys and sells commercial properties. Recently, he sold land for $ 3,270,000 to the Blackhawk Group, a developer that plans to build a new shopping mall. In addition to the $ 3,270,000 sales price, Blackhawk Group agrees to pay Flint Estate Inc. 1% of the retail sales of the mall for 10 years. Blackhawk estimates that retail sales in a typical mall project is $ 1,060,000 a year. Given the substantial increase in online sales that are occurring in the retail market, Bill had originally indicated that he would prefer a higher price for the land instead of the 1% future sales-based arrangement and suggested a price of $ 3,496,000. However, Blackhawk would not agree to those terms.
What is the transaction price for the land and related future sales-based payment that Flint Estate Inc. should record?
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