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Myrtle Company signs a 20-year franchise agreement with Sycamore Company. Sycamore Company retained significant powers, rights, and a continuing interest. Myrtle (the franchisee) makes noncontingent
Myrtle Company signs a 20-year franchise agreement with Sycamore Company. Sycamore Company retained significant powers, rights, and a continuing interest. Myrtle (the franchisee) makes noncontingent payments of $30,000 per year for the first five years of the franchise. Myrtle Company also pays a contingent fee of 2% of gross sales every month. Which of the following statements is correct? a. Myrtle Company may deduct the $30,000 per year noncontingent payments in full as they are made. b. Myrtle Company may deduct the monthly contingent fee as it is paid. c. Myrtle Company may deduct both the noncontingent annual fee and the contingent monthly fees as they are paid. d. Myrtle Company may not deduct either the noncontingent annual fee or the contingent monthly fees as they are paid. e. None of the above
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