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    mae mae's Avatar
    mae mae Posts: 1, Reputation: 1
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    #1

    Aug 27, 2015, 06:31 AM
    Accounting
    On April 30, 2014, Date and Dine entered into a franchise agreement with Food Trip Inc. to sell their products. The agreement provides for an initial franchise fee of 1 200 000 which is payable as follows: 400 000 cash to be paid upon signing the contract, and the balance in five equal annual installments every December 1, starting in 2014, Date and Dine signs a non interest bearing note for the balance. The credit rating of the franchise indicates that the money can be borrowed at 10%. The present value factor of an ordinary annuity at 10% for 5 period is 3.7908. The agreement further provides that the franchisee must pay a continuing franchise fee equal to 5% of its monthly gross sales Food Trip Inc. incurred direct cost of 540 000, of which 170 000 is related to continuing services and indirect cost of 72 000, of which 18 000 is related to contuinuing services. The franchisee started business operations on September 2, 2014 and was able to generate sales of 950 000 for 2014. The first installment payment was made in due date. Assuming that the collectibility of the note is not reasonbly assured, how much is the net income of the franchisor for the fiscal year ended December 1, 2014
    paraclete's Avatar
    paraclete Posts: 2,704, Reputation: 171
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    #2

    Sep 9, 2015, 10:30 PM
    This is obviously an assignment please show your attempt at an answer and we will discuss any difficulties

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