Please do case question 4.5

stamp in the header until final contracts have been reviewed Describe the type of transaction succinctly in the "Re" line. Draft-For Discussion Purposes only Memorandum To: Presto Hospitality Accounting Files From: Michael Jones, Accounting Policy team Date: 12/1/20X1 Re: Accounting for concessions agreement with Stadium Co. Facts Presto Hospitality (Presto) is a public company that is in the process of signing a 10-year concessions agreement with a major league baseball stadium owner (Stadium Co.). The agreement would give Presto the right and obligation to operate all of the stadium's fixed concession stands and portable food and beverage carts, to provide food and beverage service to premium seating areas (including suites), and to have hawkers selling concessions in the aisles of the stadium (Sodas! Peanuts!), collectively, the Food and Beverage Facilities. The locations of fixed concession stands within the stadium are designated in architectural drawings included within the draft concessions agreement. The draft contract states that Stadium Co., at its option and at its cost (such as the cost to rebuild leasehold improvements), can require Presto to move its locations within the stadium. The concessions agreement will require Presto to remit 50% of its gross food sales and 52% of its gross alcohol sales to Stadium Co. in exchange for the right to operate at the stadium. Presto will also be required to make an upfront payment of $5 million to Stadium Co., which will be used toward capital improvements, build-outs, and branding of the concession facilities. Throughout the operating period of this agreement, Stadium Co. will have the right to approve all of Presto's proposed menu items, pricing, and choices of suppliers, and Stadium Co. has indicated during negotiations that it plans to actively exercise this approval authority. To be chosen as the concession provider for this stadium, Presto submitted a successful bid and was selected from a group of competing potential concessionaires. Presto must determine whether this arrangement contains a lease within the scope of ASC 842 (Leases). 4.5 Presto Hospitality-Revenue Recognition Assume Presto concludes that its concession agreement with Stadium Co. is not a lease. In that case, apply the five-step revenue process in ASC 606 to this arrangement. Assume you are evaluating appropriate revenue recognition for the contract and for individual transactions that will arise within the scope of the contract (for example, a sale of a hot dog to a customer in the stadium). Assume a hot dog retails for $6, of which Presto retains 50%