Question

a) Colbert sells 3D printer systems. Recently, Colbert provided a special promotion of zero-interest financing for 2 years on any new 3D printer system. Assume that Colbert sells Lyle Cartright a 3D system, receiving a $5,000 zero-interest-bearing note on January 1, 2020. The cost of the 3D printer system is $4,000. Colbert imputes a 6% interest rate on this zero-interest note transaction. Prepare the journal entry to record the sale on January 1, 2020, and compute the total amount of revenue to be recognized in 2020.

b) Colbert sells 20 nonrefundable $100 gift cards for 3D printer paper on March 1, 2020. The paper has a standalone selling price of $100 (cost $80). The gift cards expiration date is June 30, 2020. Colbert estimates that customers will not redeem 10% of these gift cards. The pattern of redemption is as follows.

		Redemption Total
March 31		50	%
April 30		80
June 30		85

Prepare the 2020 journal entries related to the gift cards at March 1, March 31, April 30, and June 30.

Answer 1

Answer
No.	Account Titles and Explanations	Debit	Credit
01-01-2020	Notes Receivable	$         5,000
	Discount on Notes Receivable		$            550
	Sales Revenue ($5000* PVIF (2 yrs,6%)($5000*0.8899)		$         4,450
	(To record Sales)
01-01-2020	Cost of Goods Sold	$         4,000
	Inventory		$         4,000
	(To record cost of goods sold)
	Sales Revenue	$         4,450
	Interest on Notes ($4450*6%)	$            267
	Income recognized	$         4,717
	Note:- As per guidline I have answered 1st part of question.
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