Prepare a professional accounting research memorandum

Reference no: EM131881179

Problem

On January 1, 2018, Madison Wholesalers (MW) enters into a contract with a customer to sell a product for $200,000. The product will be delivered in two years on December 31, 2019, but the customer pays for it today. MW is effectively a party receiving significant financing from the customer. Based on MW's credit characteristics, its interest rate is 5% annually.

- Prepare a professional accounting research memorandum identifying the revenue recognition implications of this transaction, include citations form the Accounting Standards Classification.

- In addition to addressing the revenue implication provide the journal entries that Madison Wholesalers will record at (1) January 1, 2018, (2) December 31, 2018, (3) December 31, 2019. Assume that the product is purchased on credit by MW on December 31, 2019 for $175,000.

Reference no: EM131881179

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