Solution-Prepare entries to record the acquisition and

Prepare entries to record the acquisition and amortization

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Reference no: EM132930817

Problem - On January 1, 2019, Sun Company signed an agreement to operate as a franchise for 10 years for a franchise fee of P1, 400, 000. The franchise fee is payable as follows: Down payment of P500, 000, and the balance is payable in 3 equal annual payments of P300, 000 beginning January 1, 2020. The market rate of interest is 10%. The agreement also provided for the payment of 5% royalties based in sales. In return for these royalties, the franchisor agreed to provide marketing and promotional services for Sun Company for the duration of the franchise contract.

1. What is the cost of the franchise acquired on January 1, 2019?

2. What is the amount of the amortization expense for the franchise for the year ended December 31, 2019?

3. Prepare entries to record the acquisition and amortization of franchise in year 2019 and the first annual installment on the franchise fees on January 1 2020.

Reference no: EM132930817

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Prepare entries to record the acquisition and amortization

Reference no: EM132930817

Reference no: EM132930817

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