Question

Arctic Cat sold Seneca Motor Sports a shipment of snowmobiles. The snowmobiles were delivered on January 1, 2021, and Arctic received a note from Seneca indicating that Seneca will pay Arctic $46,200 on a future date. Unless informed otherwise, assume that Arctic views the time value of money component of this arrangement to be significant and that the relevant interest rate is 9%. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: Assume the note indicates that Seneca is to pay Arctic the $46,200 due on the note on December 31, 2021. Prepare the journal entry for Arctic to record the sale on January 1, 2021. Assume the same facts as in requirement 1, and prepare the journal entry for Arctic to record collection of the payment on December 31, 2021. Assume instead that Seneca is to pay Arctic the $46,200 due on the note on December 31, 2022. Prepare the journal entry for Arctic to record the sale on January 1, 2021. Assume instead that Arctic does not view the time value of money component of this arrangement to be significant, and that the note indicates that Seneca is to pay Arctic the $46,200 due on the note on December 31, 2021. Prepare the journal entry for Arctic to record the sale on January 1, 2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your final answers to the nearest whole dollar amount.)

Answer 1

List of Journal entries under different assumptions --

Sl	Assumption	Date	Account details	DR	CR
1	Time-value is significant. Amt receivable on 31-Dec-2021	01-01-2021	Seneca Motor Sports (Customer)	46,200
			To Sales (46200 / 1.09)		42,385
			To Deferred Interest Income		3,815
2	As before/ Collection received on 31-Dec-2021	12-31-2021	Bank	46,200
			To Seneca Motor Sports (Customer)		46,200
		12-31-2021	Deferred Interest Income	3,815
			Interest Income		3,815
3	Time-value is significant. Amt receivable on 31-Dec-2022	01-01-2021	Seneca Motor Sports (Customer)	46,200
			To Sales (46200 / 1.09)/1.09		38,886
			To Deferred Interest Income		7,314
4	Time Value is not significant	01-01-2021	Seneca Motor Sports (Customer)	46,200
			To Sales (46200 / 1.09)/1.09		46,200