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 $$5,400,000$ and must be paid to Fiber Cookie immediately. Under the terms of the contract, Fiber Cookie must deliver the software at the end of a four$-$year period. The interest rate incurred on similar financing agreements in the industry is $4\%.$

Read the requirements.

Future Value of $$1$ table Future Value of an Ordinary Annuity table Future Value of an Annuity Due table

Present Value of $$1$ table Present Value of an Ordinary Annuity table Present Value of an Annuity Due table

Requirement a$.$ Is there a significant financing component in this contract?

A$.$ A significant financing component exists because the time period from payment to delivery is four years and the interest rate is $4\%.$

B$.$ A significant financing component exists because the contract price is in excess of $$1,000,000,$ creating a need to record interest.

C$.$ A significant financing component does not exist because a valid contract is signed and the interest rate is based on the industry rate at $4\%.$

D$.$ A significant financing component does not exist because the time period from payment to delivery is four years and the interest rate is $4\%.$

Requirement b$.$ If there is a significant financing component, determine the amoint of sales revenue and interest expense to be recognized by Fiber Cookie. $($Use the present value and future value tables, a financial calculator, or a spreadsheet for your calculations. If using present and future value tables, use factor amounts rounded to five decimal places, X$.$XXXXX$.$ Round your final answer to the nearest whole dollar.$)$

Fiber Cookie will record $$ as sales revenue on the date of delivery and will recognize interest expense of $$ over the four$-$year deferral period until the software is delivered.