Question
On January 1, 20x1, an entity grants a franchisee the right to operate a restaurant in a specific market using the entitys brand name, concept
On January 1, 20x1, an entity grants a franchisee the right to operate a restaurant in a specific market using the entitys brand name, concept and menu for a period of ten years. The entity has granted others similar rights to operate this restaurant concept in other markets. The entity commonly conducts national advertising campaigns, promoting the brand name, and restaurant concept generally. The franchisee will also purchase kitchen equipment from the entity. The entity will receive 950,000 upfront (50,000 for the kitchen equipment and 900,000 for the franchise right) plus a royalty, paid quarterly, based on 4% of the franchisees sales over the life of the contract. The 50,000 amount reflects the stand-alone selling price of the kitchen equipment. The entity delivers the kitchen equipment to the customer on February 1, 20x1. The customer commences business operations on April 1, 20x1 and reports total sales of 5,000,000 for the year.
How much total revenue should the entity recognize from the contract in 20x1?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started