Happy Citrus started selling franchise locations in April 2026. The franchisee pays continuing feesbased on annual sales. The initial fee relates to finding a store location and training the franchisee atHappy Citrus' training facility over a 2-year period.Initial franchise feeContinuing franchise feesFranchise soldFranchisees' reported salesFiscal 2026 Fiscal 2027$85,000 $95,0004%5$1,500,0003%3$2,000,000Required:a) Assume that management estimates that 40% of the value of services related to the initial fee isfulfilled in the first year of signing the franchise agreement. Provide the journal entries to record howHappy Citrus should record revenues relating to initial franchise fees in fiscal 2026 and in 2027. Ignorethe time value of money.Please use Excel formula for your calculation.

Introduction to the IFRS 15 International Financial reporting standards (IFRS) 15 - This standard…

Answered: Happy Citrus started selling franchise…

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter8: Revenue Recognition, Receivables, And Advances From Customers

Section: Chapter Questions

Problem 52P

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JustKitchens Inc. provides services to restaurants and hotels. The company supplies paper products, tableware, cookware, restaurant and kitchen equipment, and cleaning supplies. On January 2, 2019, Just-Kitchens enters into a contract with a local restaurant chain to provide its services for 3 years at a cost of 10,000 per year. The restaurant chain pays the total contract fee on January 2, 2019. JustKitchenss stand-alone selling price is also 10,000 per year. After 2 years, the restaurant asks to modify the contract. On January 2, 2021, the companies agree to reduce the fee for the third year to 9,000 in exchange for extending the contract for 2 additional years at a fee of 11,000 per year. This modification is agreed to by both parties, and on that date the restaurant chain pays for the additional 2 years of service. The 11,000 fee for the additional years is the same as JustKitchenss stand-alone price. Required: 1. How should JustKitchens account for the contract modification? 2. Prepare the journal entry that JustKitchens would make over the life of the contract.
Unearned Sales Revenue Brand Landscaping offers a promotion where a customers lawn will be mowed 20 times if the customer pays $700 in advance. Required: Prepare the journal entry to record (1) the customers' prepayment of S700 and (2) Brands mowing of the lawn one time.
Premium Obligation Yummy Cereal Company is offering one toy shovel set for 15 box tops of its cereal. Year-to-date sales have been off, and it is hoped that this offer will stimulate demand. Each shovel set costs the company 3. The following data are available for the last 3 months of 2019: It is estimated that only 70% of the box tops will be redeemed. The cereal sells for 2.80 per box. Required: 1. Prepare journal entries for each month to record sales, shovel set purchases, and redemptions. 2. Assuming Yummy prepares monthly financial statements, indicate how the inventory of premiums and the estimated liability would be disclosed on Yummys ending balance sheets for October, November, and December.
Mystic Pizza Company purchases a franchise from NY Pizzeria Inc. for 96,000 on June 1, 2019. The franchise will last 8 years. Record Mystic Pizzas purchase of the franchise on June 1 and adjusting entry at the end of 2019.
Cash Rebates On January 1, 2020, Fro-Yo Inc. began offering customers a cash rebate of 5.00 if the customer mails in 10 proof-of-purchase labels from its frozen yogurt containers. Eased on historical experience, the company estimates that 20% of the labels will be redeemed. During 2020, the company sold 5,000,000 frozen yogurt containers at 1 per container. From these sales, 800,000 labels were redeemed in 2020, 150,000 labels were redeemed in 2021, and the remaining labels were never redeemed. Required: 1. Prepare the journal entries related to the sale of frozen yogurt and the cash rebate offer for 2020 and 2021. 2. Next Level Assume that 300,000 labels were redeemed in 2021. Prepare the journal entries related to the cash rebate offer for 2021.
Homeland Plus specializes in home goods and accessories. In order for the company to expand its business, the company takes out a long-term loan in the amount of $650,000. Assume that any loans are created on January 1. The terms of the loan include a periodic payment plan, where interest payments are accumulated each year but are only computed against the outstanding principal balance during that current period. The annual interest rate is 8.5%. Each year on December 31, the company pays down the principal balance by $80,000. This payment is considered part of the outstanding principal balance when computing the interest accumulation that also occurs on December 31 of that year. A. Determine the outstanding principal balance on December 31 of the first year that is computed for interest. B. Compute the interest accrued on December 31 of the first year. C. Make a journal entry to record interest accumulated during the first year, but not paid as of December 31 of that first year.
On March 1, 2019, Elkhart enters into a new contract to build a specialized warehouse for 7 million. The promise to transfer the warehouse is determined to be a performance obligation. The contract states that if the warehouse is usable by November 30, 2019, Elkhart will receive a bonus of 600,000. For every week after November 30 that the warehouse is not usable, the bonus will decrease by 150,000. Elkhart provides the following completion schedule: Required: 1. Assume that Elkhart uses the expected value approach. What amount should Elkhart use for the transaction price? 2. Assume that Elkhart uses the most likely amount approach. What amount should Elkhart use for the transaction price? 3. Next Level What is the purpose of assessing whether a constraint on the variable consideration exists?
Rix Company sells home appliances and provides installation and service for its customers. On April 1, 2019, a customer purchased a dishwasher that Rix normally sells for 1,000. In addition, the customer purchased the installation service and a 3-year service contract, with stand-alone selling prices of 200 and 400, respectively. Because the customer purchased all three items as a bundle, Rix charged the customer 1,400. Required: 1. How should the transaction price be allocated among the products? 2. Prepare the journal entries to recognize revenue related to each product in 2019.
WaterWorld Inc. operates an aquarium and water park in Orlando, Florida. In addition to daily admission tickets, WaterWorld offers two other ticket options. First, it offers an annual pass for 600 that allows unlimited access to the aquarium and theme park for one year from the date of purchase. In addition, it offers a Summer Fun Pass that allows unlimited access to the waterpark for June, July, and August for 450. Both pass options require full payment at the time of purchase. On April 1, 2019, WaterWorld entered into a contract with a customer to purchase an annual pass. On that same date, it entered into another contract with a customer to purchase a Summer Fun Pass. Required: 1. Prepare WaterWorlds journal entries in 2019 related to the annual pass. 2. Prepare WaterWorlds journal entries related to the Summer Fun Pass.
Unearned Sales Revenue Curtiss Carpet Cleaning normally charges $90 to clean one room of carpeting. During the holiday season, Curtis offers a promotion to clean the customers carpet 10 times at a discounted rate if the customer pays $600 in advance. Required: Make the journal entry to record the following transactions. 1. A customers prepayment of $600 2. Curtiss cleaning of the carpet one time
Pita Pal sells fast-food franchises. Pita Pal receives $82,000 from a new franchisee for providing initial training, equipment, and furnishings that together have a stand-alone selling price of $82,000. Pita Pal also receives $38,100 per year for use of the Pita Pal name and for ongoing consulting services (starting on the date the franchise is purchased). Rachel became a Pita Pal franchisee on March 1, 2021, and on May 1, 2021 Rachel had completed training and was open for business. How much revenue in 2021 will Pita Pal recognize for its arrangement with Rachel?
TopChop sells hairstyling franchises. TopChop receives $50,000 from a new franchisee for providing initialtraining, equipment and furnishings that have a stand-alone selling price of $50,000. TopChop also receives$30,000 per year for use of the TopChop name and for ongoing consulting services (starting on the date thefranchise is purchased). Carlos became a TopChop franchisee on July 1, 2018, and on August 1, 2018, had completed training and was open for business. How much revenue in 2018 will TopChop recognize for its arrangement with Carlos?

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