Question
JJJ Inc. leases retail space to Suddenly 42 for a base rent of $25,000 per month plus contingent rent based on 5% of the sales
JJJ Inc. leases retail space to Suddenly 42 for a base rent of $25,000 per month plus contingent rent based on 5% of the sales above $1,000,000, per annum. Based on JJJs and Suddenly 42s historical relationship, JJJ knows that Suddenly 42 earns approximately 1/2 of its annual sales between black Friday and Christmas. For the past five years running, Suddenly 42 had annual sales in excess of $2,000,000. Based on Suddenly 42s last sales report, as of October 31st, their actual sales was $950,000 and their annual sales projection is at $2,200,000. JJJ also knows that Suddenly 42s actual sales in the prior two years were $2,500,000 and $2,300,000 respectively, and therefore believes that Suddenly 42s ability to achieve its sales projection is probable. What is the amount of contingent rental revenue that JJJ should recognize as of October 31, 2020:
- $0
- $50,000
- $250,000
- Other amount $_________
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