<u>Answer number 1:</u>
The contractor is required to provide the following products and services to the client according to the deal:
1. The mainframe computer cost will be $5,524,956.6
2. Installation charges will be provided by supplier at no cost.
3. Training will be provided by company for free of cost.
Earnings can be acknowledged on the statement of financial position when they are generated and received, according to the accrual basis of accounting.
Receiving the actual money is not required. The term "realizable" indicates that the customer has got the products or services, but that reimbursement is expected afterwards.
The firm's income is based on the items or services that have been supplied.
Because the mainframe computer system product was delivered on July 1, the vendor can record revenue for the device on July 1. So, There really is no profit based on accounts of products such as implementation and training because they are to be given for free.
<u>Answer number 2:</u>
According to the given agreement, the buyer must pay a balance of $5,524,956.60 during 60 months, considering a 4% per year rate.
Computation:
Valuation
[Year 5 = Year 4 / (1+R)]
So,
Year 5 = $55,24,956.6
Year 4 = $53,12,458.27
Year 3 = $51,08,132.95
Year 2 = $49,11,666.3
Year 1 = $47,22,756.06
Total = $45,41,111.59
So,
Current value of the given agreement = $45,41,111.59
The vendor is entitled to $4,541,111.59 in revenue.
<u>Answer number 3:</u>
Interest income or revenue will IBM recognize in its December 31 regular income = The mainframe computer cost - Current value of the given agreement
⇒ Interest income or revenue will IBM recognize = $55,24,956.6 - $45,41,111.59
⇒ Interest income or revenue will IBM = 9,83,845.01
⇒ Monthly income = [9,83,845.01 / 60]
Monthly income = $16.397.42
Interest income or revenue will IBM recognize in its December 31 regular income = Monthly income x 6
⇒ Interest income or revenue will IBM recognize in its December 31 regular income = $16.397.42 x 6
Interest income or revenue will IBM recognize in its December 31 regular income = $98,384.50
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