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How does Freys treat each of these payments

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Problem - Freys, Inc., sells a 12-year "stuffed potato" franchise to Reynaldo. The franchise contains many restrictions on how Reynaldo may operate his store. For instance, Reynaldo cannot use less than Grade 10 Idaho potatoes, must bake the potatoes at a constant 410 degrees, must dress store personnel in Freys-approved uniforms, and must have a Freys sign that meets detailed specifications on size, color, and construction. When the franchise contract is signed, Reynaldo makes a noncontingent $160,000 payment to Freys. During the same year, Reynaldo pays Freys $300,000-14% of Reynaldo's sales. How does Freys treat each of these payments? How does Reynaldo treat each of the payments?

Reference no: EM132660205

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