One July 1, 2020 Bob signed an agreement to operate as a franchisee of abc co  for an initial franchise fee. A down payment was paid when the agreement was signed and the balance is payable in 4 equal annual payments of $35,000 beg July 1, 2021  The agreement provides that the down paymetn is not refundable and no future services are required of the franchisor  Bob's credit rating indicates that he can borrow money at 14% for a loan of this type If Bob records the acquisition cost at $196,400 then how much was the down payment?

CONCEPTS IN FED.TAX.,2020-W/ACCESS
20th Edition
ISBN:9780357110362
Author:Murphy
Publisher:Murphy
Chapter5: Introduction To Business Expenses
Section: Chapter Questions
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One July 1, 2020 Bob signed an agreement to operate as a franchisee of abc co  for an initial franchise fee. A down payment was paid when the agreement was signed and the balance is payable in 4 equal annual payments of $35,000 beg July 1, 2021  The agreement provides that the down paymetn is not refundable and no future services are required of the franchisor  Bob's credit rating indicates that he can borrow money at 14% for a loan of this type

If Bob records the acquisition cost at $196,400 then how much was the down payment?

I put $4,900 as the answer is that correct?

Thank you

Brenda

 

 

 

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