MWG Inc. is a franchisor of restaurants. On January 1, 2024, MWG sold the rights to open a new franchise to ABC Corporation. The franchise agreement is for five years. The contract requires ABC to pay an initial upfront fee of $250,000 on January 1, 2024, and annual payment of $50,000 due on December 31 each year. The contract outlines that the initial fee and the 5 payments of $50,000 cover the start-up kitchen equipment (delivered January 15, 2024) and new seasonal menus to be delivered 4 times a year for the contract duration on March 1, June 1, Sept 1 and Dec 1. The stand-alone price for the equipment is $200,000. New menu development is estimated to retail for $15,000 for each menu developed. MWG follows IFRS for financial reporting.

Instructions

Determine the transaction price of the franchise agreement.

allocate the transaction price to the separate performance obligations.

Prepare the journal entries for Greg's Food Inc. on:

January 1, 2024 - the initial signing and payment from ABC on the contract

January 15, 2024 - the delivery of the equipment (ignore cost of equipment)

March 1, 2024 - new menu delivered to ABC from Greg's Foods (ignore cost of menu development)

December 31, 2024 - the payment received from ABC