Assume the same information as in BE3.27.
(a) Describe how the vendor arrived at the amounts of the two options.
(b) What would have been the equivalent cash selling price?
(c) Is the risk the same to the vendor as with a cash sale?
(d) What, if any, would be the difference in the reporting on the under the two options? Would your answer change if the vendor were following ASPE?
Data from BE3.27
As CFO of a small manufacturing firm, you have been asked to determine the best financing for the purchase of a new piece of equipment. If the vendor is offering repayment options of $10,000 at the end of each year for five years, or no payment for two years followed by one payment of $46,000, which option would you recommend
