On August 1, 2013, Mason Enterprises signed an agreement to operate as a franchisee of Speedy Foods, Inc., for an initial franchise fee of $275,000. Of this amount, $95,000 was paid when the Agreement was signed, and the balance is payable in four equal annual payments of $45,000 beginning August 1, 2014. The agreement states that the down payment is non-refundable, and no future services are required from the franchisor. Mason's credit rating indicates that he can borrow money at 12% for a loan of this type. Information on present and future value factors is as follows: Present & Future Value Factors Present value of 1 at 12% for 4 periods Future value of 1 at 12% for 4 periods Value 0.64 1.57 Present value of an ordinary annuity of 1 at 12% for 4 periods 3.10 Mason should record the acquisition cost of the franchise on August 1, 2013 at: a. $184,600 b. $195,000 c. $234,500 d. $275,000

On August 1, 2013, Mason Enterprises signed an agreement to operate as a franchisee of Speedy Foods, Inc., for an initial franchise fee of $275,000. Of this amount, $95,000 was paid when the Agreement was signed, and the balance is payable in four equal annual payments of $45,000 beginning August 1, 2014. The agreement states that the down payment is non-refundable, and no future services are required from the franchisor. Mason's credit rating indicates that he can borrow money at 12% for a loan of this type. Information on present and future value factors is as follows: Present & Future Value Factors Present value of 1 at 12% for 4 periods Future value of 1 at 12% for 4 periods Value 0.64 1.57 Present value of an ordinary annuity of 1 at 12% for 4 periods 3.10 Mason should record the acquisition cost of the franchise on August 1, 2013 at: a. $184,600 b. $195,000 c. $234,500 d. $275,000

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter17: Advanced Issues In Revenue Recognition

Section: Chapter Questions

Problem 7C: On January 1, 2019, Mopps Corp. agrees to provide Conklin Company 3 years of cleaning and janitorial...

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