CONTINUING PROBLEM: FRONT ROW ENTERTAINMENT
After a successful first year, Cam and Anna decide to expand Front Row Entertainment’s operations by becoming a venue operator as well as a tour promoter. A venue operator contracts with promoters to rent the venue (which can range from amphitheaters to indoor arenas to night-clubs) for events on specific dates. In addition to receiving revenue from renting the venue, venue operators also provide services such as concessions, parking, security, and ushering services. By vertically integrating their business, Cam and Anna can reduce the expense that they pay to rent venues. In addition, they will generate additional revenue by providing services to other tour promoters.
After a little investigation, Cam and Anna locate a small venue operator that owns The Chicago Music House, a small indoor arena with a rich history in the music industry. The current owner has experienced severe health issues and has let the arena fall into a state of disrepair. However, he would like the arena to be preserved and its musical legacy to continue. After a short negotiation, on January 1, 2020, Front Row purchases the venue by paying $10,000 in cash and signing a 15-year 10% note for $380,000. In addition, Front Row purchases the right to use the "Chicago Music House" name for $25,000 cash.
During the month of January 2020, Front Row incurred the following as they renovated the arena and prepared it for the first major event scheduled for February.
Jan. 5 Paid $21,530 to repair damage to the roof of the arena.
10 Paid $45,720 to remodel the stage area.
21 Purchased concessions equipment (e.g., popcorn poppers, soda machines) for $12,350.
Renovations were completed on January 28, and the first concert was held in the arena on February 1. The arena is expected to have a useful life of 30 years and a residual value of $35,000. The concessions equipment will have a useful life of 5 years and a residual value of $250.
Required:
Prepare the
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Cornerstones of Financial Accounting
- CONTINUING PROBLEM: FRONT ROW ENTERTAINMENT After a successful first year, Cam and Anna decide to expand Front Row Entertainments operations by becoming a venue operator as well as a tour promoter. A venue operator contracts with promoters to rent the venue (which can range from amphitheaters to indoor arenas to night-clubs) for events on specific dates. In addition to receiving revenue from renting the venue, venue operators also provide services such as concessions, parking, security, and ushering services. By vertically integrating their business, Cam and Anna can reduce the expense that they pay to rent venues. In addition, they will generate additional revenue by providing services to other tour promoters. After a little investigation, Cam and Anna locate a small venue operator that owns The Chicago Music House, a small indoor arena with a rich history in the music industry. The current owner has experienced severe health issues and has let the arena fall into a state of disrepair. However, he would like the arena to be preserved and its musical legacy to continue. After a short negotiation, on January 1, 2020, Front Row purchases the venue by paying $10,000 in cash and signing a 15-year 10% note for $380,000. In addition, Front Row purchases the right to use the Chicago Music House name for $25,000 cash. During the month of January 2020, Front Row incurred the following as they renovated the arena and prepared it for the first major event scheduled for February. Jan. 5 Paid $21,530 to repair damage to the roof of the arena. 10 Paid $45,720 to remodel the stage area. 21 Purchased concessions equipment (e.g., popcorn poppers, soda machines) for $12,350. Renovations were completed on January 28, and the first concert was held in the arena on February 1. The arena is expected to have a useful life of 30 years and a residual value of $35,000. The concessions equipment will have a useful life of 5 years and a residual value of $250. Required: Would amortization expense be recorded for the trademark? Why or why not?arrow_forwardCONTINUING PROBLEM: FRONT ROW ENTERTAINMENT After a successful first year, Cam and Anna decide to expand Front Row Entertainments operations by becoming a venue operator as well as a tour promoter. A venue operator contracts with promoters to rent the venue (which can range from amphitheaters to indoor arenas to night-clubs) for events on specific dates. In addition to receiving revenue from renting the venue, venue operators also provide services such as concessions, parking, security, and ushering services. By vertically integrating their business, Cam and Anna can reduce the expense that they pay to rent venues. In addition, they will generate additional revenue by providing services to other tour promoters. After a little investigation, Cam and Anna locate a small venue operator that owns The Chicago Music House, a small indoor arena with a rich history in the music industry. The current owner has experienced severe health issues and has let the arena fall into a state of disrepair. However, he would like the arena to be preserved and its musical legacy to continue. After a short negotiation, on January 1, 2020, Front Row purchases the venue by paying $10,000 in cash and signing a 15-year 10% note for $380,000. In addition, Front Row purchases the right to use the Chicago Music House name for $25,000 cash. During the month of January 2020, Front Row incurred the following as they renovated the arena and prepared it for the first major event scheduled for February. Jan. 5 Paid $21,530 to repair damage to the roof of the arena. 10 Paid $45,720 to remodel the stage area. 21 Purchased concessions equipment (e.g., popcorn poppers, soda machines) for $12,350. Renovations were completed on January 28, and the first concert was held in the arena on February 1. The arena is expected to have a useful life of 30 years and a residual value of $35,000. The concessions equipment will have a useful life of 5 years and a residual value of $250. Required: Compute and record the depreciation for 2020 (11 months) on the arena (use the straight-line method) and on the concessions equipment (use the double-declining-balance method). Round all answers to the nearest dollar.arrow_forwardScenario: Jay and Kay are opening a pain store to be registered as J&K Paint Shop Company Ltd. There is no other competing pain shop in the area, but their fundamental decision is how to organize the business and they anticipate a substantial profit in the first year, with the ability to sell franchises in the future. Although they have enough to start the business now as a partnership, cash flow will be an issue as they grow. They feel the corporate form of operation will be best for the long term. They seek your advice based on answers to the following questions: Questions: Which of the following characteristics is an advantage of the corporate form of business? Higher degree of government regulation The potential to raise large amounts of capital Separation of ownership and management Double taxation Which of the following statements describes the corporate characteristic termed limited liability? The liabilities of the corporation cannot be extended to the personal assets…arrow_forward
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- Ben and Eric are opening a comic bookstore to be registered as E&B Comic Bookstore Co. There is no other competing comic bookstore in the area. Their fundamental decision is how to organize the business and they anticipate a substantial profit in the first year, with the ability to sell franchises in the future. Although they have enough to start the business now as a partnership, cash flow will be an issue as they grow. They feel the corporate form of operation will be best for the long term. They seek your advice.Requirements1. What is the main advantage they gain by selecting a corporate form of business now? 2. Distinguish between par value and issue price. 3. If they decide to issue $1 par common stock and anticipate an initial market price of $80 per share, how many shares will they need to issue to raise $4,000,000? 4. The owners are desirous of comparing serval financial transactions and possible outcomes to assist in guiding their decision-making process. They assume that…arrow_forwardBen and Eric are opening a comic bookstore to be registered as E&B Comic Bookstore Co. There is no other competing comic bookstore in the area. Their fundamental decision is how to organize the business and they anticipate a substantial profit in the first year, with the ability to sell franchises in the future. Although they have enough to start the business now as a partnership, cash flow will be an issue as they grow. They feel the corporate form of operation will be best for the long term. They seek your advice.Requirements1. What is the main advantage they gain by selecting a corporate form of business now?2. Distinguish between par value and issue price.3. If they decide to issue $1 par common stock and anticipate an initial market price of $80 per share, how many shares will they need to issue to raise $4,000,000?4. The owners are desirous of comparing serval financial transactions and possible outcomes to assist in guiding their decision-making process. They assume that the…arrow_forwardBen and Eric are opening a comic bookstore to be registered as E&B Comic Bookstore Co. There is no other competing comic bookstore in the area. Their fundamental decision is how to organize the business and they anticipate a substantial profit in the first year, with the ability to sell franchises in the future. Although they have enough to start the business now as a partnership, cash flow will be an issue as they grow. They feel the corporate form of operation will be best for the long term. They seek your advice. Requirements: Distinguish between par value and issue price.arrow_forward
- Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning