t to sell one of its machines to Orzo for £955,000 with payment on completion in two years. Alternatively, Orzo can pay £850,000 on signing the contract. The difference in price is equivalent to a 6% borrowing rate. The customer decides to pay up front, and pays £850,000 on 1 October 2020
Fusilli plc operates a business building and selling high-tech specialised machinery that takes
two years to build. Delivery and legal title to the machinery passes to the customer once
construction is complete.
On 1 October 2020 Fusilli entered a contract to sell one of its machines to Orzo for £955,000 with
payment on completion in two years. Alternatively, Orzo can pay £850,000 on signing the
contract. The difference in price is equivalent to a 6% borrowing rate. The customer decides to
pay up front, and pays £850,000 on 1 October 2020
Fusilli has a 30 September 2021 year end.
(i) Show the accounting entries (using either debits and credits or the
accounting equation
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