Question
Please how work and calculations on how you got to answer. Monitor Muffler sells franchise arrangements throughout the United States and Canada. Under a franchise
Please how work and calculations on how you got to answer.
Monitor Muffler sells franchise arrangements throughout the United States and Canada. Under a franchise agree-ment, Monitor receives $1,200,000 in exchange for satisfying the following separate performance obligations: (1) franchisees have a five-year right to operate as a Monitor Muffler retail establishment in an exclusive sales ter-ritory, (2) franchisees receive initial training and certification as a Monitor Mechanic, and (3) franchisees receive a Monitor Muffler building and necessary equipment. The stand-alone selling price of the initial training and certi-fication is $30,000, and $900,000 for the building and equipment. Monitor estimates the stand-alone selling price of the five-year right to operate as a Monitor Muffler establishment using the residual approach. Monitor received $150,000 on July 1, 2018, from Perkins and accepted a note receivable for the rest of the fran-chise price. Monitor will construct and equip Perkinss building and train and certify Perkins by September 1, and Perkinss five-year right to operate as a Monitor Muffler establishment will commence on September 1 as well.
1. What amount would Monitor calculate as the stand-alone selling price of the five-year right to operate as a Monitor Muffler retail establishment?
2. What journal entry would Monitor record on July 1, 2018, to reflect the sale of a franchise to Dan Perkins?
3. How much revenue would Monitor recognize in the year ended December 31, 2018, with respect to its fran-chise arrangement with Perkins? (Ignore any interest on the note receivable.)
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