Question
On December 1, 2020, CAMOUFLAGE COMPANY granted a 5-year franchise right to MILITARY INC. for an initial franchise fee of $400,000 and a 10% sales-based
On December 1, 2020, CAMOUFLAGE COMPANY granted a 5-year franchise right to MILITARY INC. for an initial franchise fee of $400,000 and a 10% sales-based royalty. The initial franchise fee is non-refundable and due upon signing of the contract. At contract inception, CAMOUFLAGE COMPANY determines that the nature of its promise to grant the license is to provide the customer with the right to access CAMOUFLAGE COMPANY's intellectual property as it exist throughout the license period.
As of December 31, 2020, CAMOUFLAGE COMPANY has no remaining obligation or intent to refund any of the cash received, all the initial services necessary to setup the contract have been performed, and MILITARY INC. started operating the franchise business. MILITARY INC. reported sales of $800,000 for 2020. How much revenue shall CAMOUFLAGE COMPANY recognize in 2020?
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