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Frankies Homemade Cheese Shop (Frankies) signed an advertising agreement with Simmons Boards (Owner) for billboard advertising rights along Route 33 in the town of Hampton.
Frankies Homemade Cheese Shop (Frankies) signed an advertising agreement with Simmons Boards (Owner) for billboard advertising rights along Route 33 in the town of Hampton. Frankies has the right to select and display advertising copy on billboard panels numbered 10 and 12 (panel numbers correspond to designated billboard locations) for a 3-year period from Jan. 1, 20X1, to Dec. 31, 20X3. In consideration for these rights, Frankies agrees to pay $10,000 in year 1, $12,000 in year 2, and $13,000 in year 3. Assume that Frankies is required to pay the annual fee on Jan. 1 of each contract year. Assuming Frankies incremental borrowing rate is 5%, what are the entries Frankie should record at inception of the contract, then at the end of years 1, 2, and 3?
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