On July 1, 2012, Ed Wynne signed an agreement to operate as a franchisee of Kwik Foods, Inc., for an initial franchise fee of $240,000. Of this amount, $80,000 was paid when the Agreement was signed and the balance is payable in four equal annual payments of $40,000 beginning July 1, 2013. The agreement provides that the down payment is not refundable and no future services are required of the franchisor. Wynne's credit rating indicates that he can borrow money at 14% for a loan of this type. Information on present and future value factors is as follows: Present value of 1 at 14% for 4 periods Future value of 1 at 14% for 4 periods 0.59 1.69 Present value of an ordinary annuity of 1 at 14% for 4 periods 2.91 Wynne should record the acquisition cost of the franchise on July 1, 2012 at: a. $174,400. b. $196,400. c. $240,000. d. $270,400.

On July 1, 2012, Ed Wynne signed an agreement to operate as a franchisee of Kwik Foods, Inc., for an initial franchise fee of $240,000. Of this amount, $80,000 was paid when the Agreement was signed and the balance is payable in four equal annual payments of $40,000 beginning July 1, 2013. The agreement provides that the down payment is not refundable and no future services are required of the franchisor. Wynne's credit rating indicates that he can borrow money at 14% for a loan of this type. Information on present and future value factors is as follows: Present value of 1 at 14% for 4 periods Future value of 1 at 14% for 4 periods 0.59 1.69 Present value of an ordinary annuity of 1 at 14% for 4 periods 2.91 Wynne should record the acquisition cost of the franchise on July 1, 2012 at: a. $174,400. b. $196,400. c. $240,000. d. $270,400.

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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On January 1, 2019, Mopps Corp. agrees to provide Conklin Company 3 years of cleaning and janitorial services. The contract sets the price at 12,000 per year, which is the normal standalone price that Mopps charges. On December 31, 2020, Mopps and Conklin agree to modify the contract. Mopps reduces the fee for the third year to 10,000, and Conklin agrees to a 4-year extension that will extend services through December 31, 2024, at a price of 15,000 per year. At the time that the contract is modified, Mopps is charging other customers 13,500 for the cleaning and janitorial service. Required: Should Mopps and Conklin treat the modification as a separate contract? If so how should Mopps account for the contract modification on December 31, 2020? Support your opinion by discussing the application to this case of the factors that need to be considered for determining the accounting for contract modifications.
On December 31, 2018, SG signed an agreement authorizing Asher Company to operate as a franchisee for an initial franchise fee of P750,000. Of this amount, P250,000 nonrefundable down payment was paid upon signing of the agreement and the balance is payable in four equal annual payment beginning December 31, 2018. The nonrefundable down payment represents a fair measure of the services already performed by SG however, substantial future services are required of SG. Asher’s credit rating is such that collection of the note is reasonably certain and that the money can be borrowed at 12%. On December 31, 2018, earned franchise fees should be reported as: (Round off present value factor to 2 decimal places.)
On July 1, 2012, ed wynne signed an agreement to operate as a franchise solve this question
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