Subject = general accounting question On March 1, 2024, Glen Corp. signs an agreement to operate as afranchisee for $200,000.•Pays $60,000 upfrontBalance of $140,000 paid over 7 years in equal annualinstallments of $20,000PV of an ordinary annuity of 1 at 12% for 7 years = 4.56What is the total acquisition cost of the franchise?

Step 1: Detailed explanation of Total Acquisition CostThe total acquisition cost of the franchise is…

Answered: On March 1, 2024, Glen Corp. signs an…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Bitag is a dealer in machinery. On January 1, 2023, a machinery was leased toanother entity with the following provisions: Annual rental payable at the end of each year 2,000,000Lease term and useful life of machinery 5 yearsCost of machinery 6,000,000Residual value – guaranteed 1,000,000Implicit interest rate 12%PV of an ordinary annuity of 1 for 5 periods at 12% 3.60PV of 1 for 5 periods at 12% 0.57 There is no transfer of title nor bargain purchase option. What amount of cost of goods sold should be reported? 5,430,0006,000,0007,000,0007,200,000
2
On January 1, 2022, Blight Stones obtained a franchise from Doug Corporation to sell for 20 years Doug’s product. The initial franchise fee as agreed upon shall be P6,000,000, and shall be payable in cash, P1,000,000, when the contract is signed and the balance in four equal installments thereafter, as evidenced by a noninterest bearing note. The agreement provides that the franchisor shall provide the necessary initial services required under a franchise contract. The agreement also provides that 5% of the revenue from the franchise must be paid to the franchisor. Revenue from the franchise for 2022 was P5,000,000. The present value factor of P1 at 12% for 4 periods 0.6355 The present value factor of P1 ordinary annuity at 12% for 4 periods 3.0373 23) How much is the initial cost of the franchise? 24) How much is the total expenses for the year 2022?
On January 1, 20x1, Entity X sells a building to Entity Y for ₱900,000 cash and simultaneously leases the building back. Additional information follows: Fair value of building 1,000,000 Carrying amount of building 800,000 Remaining useful life of building 10 years Lease term 5 years Annual rent payable at the end of each year 100,000 Implicit interest rate equal to Market rate 12% The transfer qualifies as a sale under PFRS 15. What amount of gain should Entity X recognize at lease commencement date? 0 107,904 263,244 174,904
a
On January 2, 2024, The XYZ Corporation is negotiating the acquisition of machinery from WQR, Inc. for (1) a single purchase payment of $500,000 OR (2) an annual 6-year lease payment of $96,075, when the current interest rate for such transactions is 7%. At the end of a lease agreement, XYZ would receive legal title to the equipment from WQR. The machinery has an expected useful life of 9 years. The annual estimated administrative costs for the machinery are $12,000. It is important that XYZ does not have processes currently in place to accommodate the additional administrative costs. Given the time value of money, approximately how much would it cost if XYZ decides to acquire the machinery? A) $500,000 B) $547,200 C) $568,200 D) $578,200 E) None of the above.
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10. During 2021, Entity K purchased a franchise for P960,000. In addition, 5% of the revenue from the franchise must be paid to the franchisor. Revenue from the franchise for 2021 was P5,000,000. Entity K estimates the useful life of the franchise to be 10 years and takes full year's amortization in the year of purchase. The total franchise-related expenses is *
On January 1, 2020, Morris Company sells land to Lopez Corporation for $10,000,000, and immediately leases the land back. The following information relates to this transaction: 1. The term of the noncancelable lease is 20 years and the title transfers to Morris Company at the end of the lease term. 2. The land has a cost basis of $8,400,000 to Morris. 3. The lease agreement calls for equal rental payments of $943,074 at the beginning of each year. 4. The land has a fair value of $10,000,000 on January 1, 2020. The incremental borrowing rate of Morris Company is 10%. Morris is aware that Lopez Corporation set the annual rentals to ensure a rate of return of 8%. 5. 6. Morris Company pays all executory costs which total $255,000 in 2020. 7. Collectibility of the rentals is reasonably predictable, and there are no important uncertainties surrounding the costs yet to be incurred by the lessor. Instructions Prepare the journal entries for the entire year 2020 on the books of Morris Company…
Herald Company is a dealer in equipment. On January 1, 2020, an equipment was leased to another entity with the following provisions: Annual rental payable at the end of each year P1,500,000 Lease term and useful life of machinery 5 years Cost of equipment P4,000,000 Residual value – unguaranteed P500,000 Implicit interest rate 12% At the end of the lease term on December 31, 2024, the equipment will revert to the lessor, Herald Company. The perpetual inventory system is used. Herald Company incurred initial direct cost of P200,000 in finalizing the lease agreement. 1. What is the total financial revenue to be reported by Herald Company? 2. What is the interest revenue to be recognized by Herald for 2020? 3. Herald Company should report profit on the sale for 2020 at?
On January 1, 2023, Lara Co. purchases a license for $150,000. It pays $50,000 upfront and agrees to pay the remaining balance in five equal installments of $20,000, starting January 1, 2024. Lara's borrowing rate is 10%, and the PV of an ordinary annuity of 1 for 5 years at 10% is 3.79. What is the acquisition cost of the license?
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