q15:

SMITH Company offers franchises for sale.

It recently agreed a deal with a new Franchisee: JONES COMPANY.

The terms of the deal are as follows:

FRANCHISE FEE PRICE CHARGED TO JONES: CASH $400,000 PLUS NOTE with a Nominal Value of $150,000 and a Present Value (of future cash flows) of $100,000

ALLOCATION OF FRANCHISE FEE PRICE TO SERVICES TO BE PROVIDED BY SMITH TO JONES:

Franchise Fee (for Brand rights/'know how'/exclusive location): 70% of Price Charged to Jones

Training Services: 20% of Price Charged to Jones

Consultancy Fee: 10% of Price Charged to Jones.

The parties met to discuss the terms on 1 September 2018. The deal was finally signed by both parties on 1 January 2019. All services may be assumed to have been provided by 1 April 2019.

Required:

Referring only to the Training Services component of the overall, what journal entry should be made by SMITH COMPANY on 1 April 2019?

Select one:

a. Debit: Service Revenue (Training) $80,000; Credit: Unearned Service Revenue (Training) $80,000

b. None of these answers

c. Debit: Unearned Service Revenue (Training) $80,000; Credit: Service Revenue (Training) $80,000

d. Debit: Unearned Service Revenue (Training) $100,000; Credit Service Revenue (Training) $100,000

e. Debit: Service Revenue (Training) $100,000; Credit: Unearned Service Revenue (Training) $100,000

q16:

BUILDING COMPANY provided the following information about one of it's construction contracts (CONTRACT XY):

Cost incurred to date: $500,000

Cost to complete: $2,500,000

Contract price = Total Cost Plus $1,000,000

Amount paid to date by client: $100,000

How much PROFIT/LOSS should BUILDING COMPANY recognize on CONTRACT XY?

Select one:

a. None of these answers

b. PROFIT OF $800,000

c. PROFIT OF $1,000,000

d. PROFIT OF $500,000

e. PROFIT OF $250,000

q17:

SMITH Company offers franchises for sale.

It recently agreed a deal with a new Franchisee: JONES COMPANY.

The terms of the deal are as follows:

FRANCHISE FEE PRICE CHARGED TO JONES: CASH $400,000 PLUS NOTE with a Nominal Value of $150,000 and a Present Value (of future cash flows) of $100,000

ALLOCATION OF FRANCHISE FEE PRICE TO SERVICES TO BE PROVIDED BY SMITH TO JONES:

Franchise Fee (for Brand rights/'know how'/exclusive location): 70% of Price Charged to Jones

Training Services: 20% of Price Charged to Jones

Consultancy Fee: 10% of Price Charged to Jones.

The parties met to discuss the terms on 1 September 2018. The deal was finally signed by both parties on 1 January 2019. All services may be assumed to have been provided by 1 April 2019.

Required:

On 31 December 2019, the journal entry for SMITH COMPANY will include which of the following entries? (note: the numerical amounts are not required)

Select one:

a. Debit: Interest Revenue; Credit Cash;

b. Debit Cash: Credit Consultancy Revenue

c. Debit: Cash: Credit: Unearned Consultancy Revenue

d. Debit: Cash; Credit: Interest Revenue

e. None of these answers

q18:

SMITH Company offers franchises for sale.

It recently agreed a deal with a new Franchisee: JONES COMPANY.

The terms of the deal are as follows:

FRANCHISE FEE PRICE CHARGED TO JONES: CASH $400,000 PLUS NOTE with a Nominal Value of $150,000 and a Present Value (of future cash flows) of $100,000

ALLOCATION OF FRANCHISE FEE PRICE TO SERVICES TO BE PROVIDED BY SMITH TO JONES:

Franchise Fee (for Brand rights/'know how'/exclusive location): 70% of Price Charged to Jones

Training Services: 20% of Price Charged to Jones

Consultancy Fee: 10% of Price Charged to Jones.

The parties met to discuss the terms on 1 September 2018. The deal was finally signed by both parties on 1 January 2019. All services may be assumed to have been provided by 1 April 2019.

Required:

On 1 January 2019 the journal entry for SMITH COMPANY will include which ONE of the following?

Select one:

a. Debit: Cash $400,000; Debit: Note Receivable: $150,000

b. None of these answers

c. Debit: Cash $400,000; Debit: Note Receivable: $100,000

d. Debit: Cash $500,000

e. Debit: Unearned Franchise Revenue: $400,000