Question: Smart Cookie Learning Centers enters into a contract to customize and sell its LaLa tutoring software to the Westbro United School District. The contract price

Smart Cookie Learning Centers enters into a contract to customize and sell its LaLa tutoring software to the Westbro United School District. The contract price is $ 6,000,000 and must be paid to Smart Cookie immediately. Under the terms of the contract, Smart Cookie must deliver the software at the end of a two- year period. The interest rate incurred on similar financing agreements in the industry is 8%.
Required
a. Is there a significant financing component in this contract?
b. If there is a significant financing component, determine the amount of sales revenue and interest expense to be recognized by Smart Cookie.

Step by Step Solution

★★★★★

3.41 Rating (170 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

a A significant financing component exists because the time ... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

578-B-A-V-I (1594).docx

120 KBs Word File

Students Have Also Explored These Related Accounting Questions!

On May 10, 2017, Cosmo Co. enters into a contract to deliver a product to Greig Inc. on June 15, 2017. Greig agrees to pay the full price of $2,000 on July 15, 2017. The cost of goods is $1,300....

WCM Builders enters into a contract to build a shopping mall in 2011 for $6,000,000. Completion of the mall is expected to take 2 years and cost WCM $3,600,000. Upon signing the contract, WCM...

McDonald's enters into a contract to sell Billy Bear dolls for Toys4U Stores. Based on the contract, McDonald's displays the dolls in selected stores. Toys4U is not paid until the dolls have been...

Cookie Learning Centers enters into a contract to customize and sell its LaLa tutoring software to the Westbro United School District. The contract price is $ 5 comma 500 comma 000 and must be paid...

Fiber Cookie Learning Centers enters into a contract to customize and sell its LaLa tutoring software to the Westbro United School District. The contract price is $ 5 , 4 0 0 , 0 0 0 and must be paid...

Foster Cookie Learning Centers enters into a contract to customize and sell its LaLa tutoring software to the Westbro United School District. The contract price is $5,700,000 and must be paid to...

I am working on my group project for the class teaching by prof. Karen Kukla. My group chose the business EduXperience . There are 3 part of the project: and I need help for question 2. Description...

AudienceView Case (attached) Questions Identify which issues are the most important to come to grips with (that is if you do not get a positive answer, you would not go forward with this investment?...

For the beam shown in Figure P4-5, determine the rotation at pin support A and the rotation and displacement under the load P. Determine the reactions. Draw the shear force and bending moment...

On June 2, 2014, a telephone expense for $210 was debited to Repair Expense. On July 11, 2014, this error was found. Prepare the correcting journal entry. When would a correcting entry not be needed?

a. Given the following hypotheses, determine the p-value when x = 21, n = 25, and = 5. H0: = 20 H1: 20 b. Repeat part (a) with x = 22. c. Repeat part (a) with x = 23. d. Describe what happens to...

Chapter 1 2 Homework 2 . Assume a \ ( \ $ 4 0 , 0 0 0 \ ) investment and the following cash flows for two alternatives. Which of the alternatives would you select under the payback method?

What are the implications for your performance in school? Work?

Explain how the present value of an ordinary annuity interest table is converted to the present value of an annuity due interest table.

Question 7 (1 point) A firm has determined its target capital structure and it after-tax cost for each source of capital. What is the firm's weighted average cost of capital (WACC)? (Enter your...

Please show all work. Thank you. Suppose the stock price of Company A is $Qt. The expected dividend for the next three years is $8,$15 and $27 per share. The expected price of the stock in the fourth...

Dome Metals has credit sales of $540,000 yearly with credit terms of net 45 days, which is also the average collection period. Dome does not offer a discount for early payment, so its customers take...