Circuit Fitness (CF) sells customized exercise equipment to fitness centers. On September 1st, 2021, 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 November 1, 2022. CF will deliver the equipment on October 1, 2022. The contract specifies that the SFC will pay $1,400,000 within 7 days of the contract being signed by both parties. SFC made the payment on September 5, 2021. The amount of interest on similar projects for this time period equates to $120,000. CF has significant experience in these types of transactions and
Circuit Fitness (CF) sells customized exercise equipment to fitness centers. On September 1st, 2021, 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 November 1, 2022. CF will deliver the equipment on October 1, 2022.
The contract specifies that the SFC will pay $1,400,000 within 7 days of the contract being signed by both parties. SFC made the payment on September 5, 2021.
The amount of interest on similar projects for this time period equates to $120,000. 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 interest expense be recognized or interest income?
- What is the transaction price?
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