Chipotle Inc. grants franchisees the right to operate a franchise using the company’s name, menu, and operational procedures. On June 1, a franchisee enters into a 5-year contract with Chipotle and pays a $250,000 initial franchise fee. The franchisee also pays $60,000 for equipment for the restaurant with a delivery date scheduled in 10 days. Per the contract, the franchisee will also pay a royalty equal to 3% of the franchisee sales over the contract life. Chipotle expects monthly sales at the franchise to be $100,000 per month based on extensive historical data. What is the number of performance obligations in the contract? Group of answer choices 1 – a franchise 1 – equipment 1 - license 2 – license and equipment 3 – license, equipment, lifetime support

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Chipotle Inc. grants franchisees the right to operate a franchise using the company’s name, menu, and operational procedures. On June 1, a franchisee enters into a 5-year contract with Chipotle and pays a $250,000 initial franchise fee. The franchisee also pays $60,000 for equipment for the restaurant with a delivery date scheduled in 10 days. Per the contract, the franchisee will also pay a royalty equal to 3% of the franchisee sales over the contract life. Chipotle expects monthly sales at the franchise to be $100,000 per month based on extensive historical data.

What is the number of performance obligations in the contract?

Group of answer choices
1 – a franchise
1 – equipment
1 - license
2 – license and equipment
3 – license, equipment, lifetime support
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