Fouth Level (FL) manufactures and sells 3D printers. Refer to research memo #1 for FL's regular sales practices.

For the summer months, FL is offering a special "zero percent" financing promotion. The promotion gives FL's customers two choices for printer purchases. For those customers financing their purchase, the terms are $2,000 due at delivery and a promissory note with 23 monthly installments reduced to $260.87 each ($6,000/23 =$260.87.) The monthly payments commence one month from the date of sale. FL still believes that an APR of 6% compounded monthly is a market rate of return on customer financing. If a buyer chooses to pay $8,000 at the time of purchase, they will receive the printer and as a bonus: a $350 non-refundable stored valued card. Reminder, the $350 stored valued card allows the customer to purchase five plastic filaments "ink" replacement cartridges. The replacement cartridges sell for $90 each when purchased separately and cost $55 each to produce. The card expires two years from the date of the purchase. Based on extensive experience with these cards, FL estimates that, on average, ninety percent (90%) of the stored value gets used before expiration. On average, customers utilize the stored value cards 4.5 times before expiration. 1. in a structured professional research memo, explain how the two choices under the summer promotion impact FL's accounting for revenue recognition under ASC topic 606. Refer to the five-step process, and start the memo with the step that is affected by the promotion. 2. prepare FL revenue recognition journal entries using the journal entry template assuming: 1. customer A pays $8,000 cash to FL for the printer and the stored value card. 2. Customer A redeems her stored value card to obtain a single replacement cartridge. 3. Customer B finances the purchase of the printer by making the down payment of $2,000 and giving FL a promissory note for 23 months installments of $260.87 each. 4. Customer B makes the first monthly payment of $260.87

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The promotion gives FLs customers two choices for printer purchases 1 in a structured professional r... View the full answer