FRANCHISE FEES Wok this Way is a famous dance studio in downtown Toronto. They are very popular and seeking to grow their busienss. As such, Wok This Way has signed a franchise agreement on May 31, 2027 to allow a franchisee to operate downtown Montreal for a 10-year period. - The agreement requires the franchisee to payWok This Way $167,000 initially, and a royalty of 51% of sales revenue thereafter. - Sales at this franchise location for the first year are $20 million from when the franchise opened on June 1, 20274. The management of Wok This Way estimates that the value of services rendered to this franchisee-such as location and demographic analysis, initial staffing, and training represents 97%. of the intial fee paid. The remaining fee relates to ongoing services to be provided to the franchisee over the term of the franchise agreement. REQUIRED: How much revenue should be recorded in May?
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- Paul Swanson has an opportunity to acquire a franchise from The Yogurt Place, Ic., to dispense frozen yogurt products under The Yogurt Place name. Mr. Swanson has assembled the following information relating to the franchise: a. A suitable location in a large shopping mall can be rented for $2,800 per month. b. Remodeling and necessary equipment would cost $276,000. The equipment would have a 20-year life and a $13,800 salvage value. Straight-line depreciation would be used, and the salvage value would be considered in computing depreciation. c. Based on similar outlets elsewhere, Mr. Swanson estimates that sales would total $310,000 per year. Ingredients would cost 20% of sales. d. Operating costs would include $71,000 per year for salaries, $3,600 per year for insurance, and $28,000 per year for utilities. In addition, Mr. Swanson would have to pay a commission to The Yogurt Place, Inc., of 13.0% of sales.Paul Swanson has an opportunity to acquire a franchise from The Yogurt Place, Incorporated, to dispense frozen yogurt products under The Yogurt Place name. Mr. Swanson has assembled the following information relating to the franchise: A suitable location in a large shopping mall can be rented for $4,200 per month. Remodeling and necessary equipment would cost $360,000. The equipment would have a 15-year life and a $24,000 salvage value. Straight-line depreciation would be used, and the salvage value would be considered in computing depreciation. Based on similar outlets elsewhere, Mr. Swanson estimates that sales would total $450,000 per year. Ingredients would cost 20% of sales. Operating costs would include $85,000 per year for salaries, $5,000 per year for insurance, and $42,000 per year for utilities. In addition, Mr. Swanson would have to pay a commission to The Yogurt Place, Incorporated, of 15.0% of sales. Required: 1. Prepare a contribution format income statement that shows…Joe Swanson has an opportunity to acquire a franchise from The Yogurt Place, Inc. to dispense frozen yogurt products under the name The Yogurt Place. Swanson has assembled the following information relating to the franchise: a. A suitable location in a large shopping mall can be rented for $5,480 per month. b. Remodelling and necessary equipment would cost $337,500. The equipment would have a 15-year life and an $10,500 salvage value. Straight-line depreciation would be used. c. On the basis of similar outlets elsewhere, Swanson estimated that sales would total $440,000 per year. Ingredients would cost 20% of sales. d. Operating costs would include $143,500 per year for salaries, $5,600 per year for insurance, and $30,500 per year for utilities. In addition, Swanson would have to pay a commission to The Yogurt Place of 12.5% of sales. Required: 1. Prepare a contribution format income statement that shows the expected net operating income each year from the franchise outlet. Deduct:…
- Paul Swanson has an opportunity to acquire a franchise from The Yogurt Place, Inc., to dispense frozenyogurt products under The Yogurt Place name. Mr. Swanson has assembled the following informationrelating to the franchise:a. A suitable location in a large shopping mall can be rented for $3,500 per month.b. Remodeling and necessary equipment would cost $270,000. The equipment would have a 15-yearlife and an $18,000 salvage value. Straight-line depreciation would be used, and the salvage valuewould be considered in computing depreciation.c. Based on similar outlets elsewhere, Mr. Swanson estimates that sales would total $300,000 per year.Ingredients would cost 20% of sales.d. Operating costs would include $70,000 per year for salaries, $3,500 per year for insurance, and$27,000 per year for utilities. In addition, Mr. Swanson would have to pay a commission to TheYogurt Place, Inc., of 12.5% of sales.Required:(Ignore income taxes.)1. Prepare a contribution format income statement that…Paul Swanson has an opportunity to acquire a franchise from The Yogurt Place, Inc., to dispense frozen yogurt products under The Yogurt Place name. Mr. Swanson has assembled the following information relating to the franchise: A suitable location in a large shopping mall can be rented for $5,100 per month. Remodeling and necessary equipment would cost $414,000. The equipment would have a 15-year life and a $27,600 salvage value. Straight-line depreciation would be used, and the salvage value would be considered in computing depreciation. Based on similar outlets elsewhere, Mr. Swanson estimates that sales would total $540,000 per year. Ingredients would cost 20% of sales. Operating costs would include $94,000 per year for salaries, $5,900 per year for insurance, and $51,000 per year for utilities. In addition, Mr. Swanson would have to pay a commission to The Yogurt Place, Inc., of 16.0% of sales. Required: 1. Prepare a contribution format income statement that shows the expected…Paul Swanson has an opportunity to acquire a franchise from The Yogurt Place, Inc., to dispense frozen yogurt products under The Yogurt Place name. Mr. Swanson has assembled the following information relating to the franchise: A suitable location in a large shopping mall can be rented for $3,500 per month. Remodeling and necessary equipment would cost $318,000. The equipment would have a 20-year life and a $15,900 salvage value. Straight-line depreciation would be used, and the salvage value would be considered in computing depreciation. Based on similar outlets elsewhere, Mr. Swanson estimates that sales would total $380,000 per year. Ingredients would cost 20% of sales. Operating costs would include $78,000 per year for salaries, $4,300 per year for insurance, and $35,000 per year for utilities. In addition, Mr. Swanson would have to pay a commission to The Yogurt Place, Inc., of 11.5% of sales. Required: 1. Prepare a contribution format income statement that shows the expected…
- Paul Swanson has an opportunity to acquire a franchise from The Yogurt Place, Inc., to dispense frozen yogurt products under The Yogurt Place name. Mr. Swanson has assembled the following information relating to the franchise: A suitable location in a large shopping mall can be rented for $3,500 per month. Remodeling and necessary equipment would cost $318,000. The equipment would have a 20-year life and a $15,900 salvage value. Straight-line depreciation would be used, and the salvage value would be considered in computing depreciation. Based on similar outlets elsewhere, Mr. Swanson estimates that sales would total $380,000 per year. Ingredients would cost 20% of sales. Operating costs would include $78,000 per year for salaries, $4,300 per year for insurance, and $35,000 per year for utilities. In addition, Mr. Swanson would have to pay a commission to The Yogurt Place, Inc., of 11.5% of sales. Required: 1. Prepare a contribution format income statement that shows the expected net…Paul Swanson has an opportunity to acquire a franchise from The Yogurt Place, Inc., to dispense frozen yogurt products under The Yogurt Place name. Mr. Swanson has assembled the following information relating to the franchise: a. A suitable location in a large shopping mall can be rented for $3,400 per month. b. Remodeling and necessary equipment would cost $312,000. The equipment would have a 20-year life and a $15,600 salvage value. Straight-line depreciation would be used, and the salvage value would be considered in computing depreciation. c. Based on similar outlets elsewhere, Mr. Swanson estimates that sales would total $370,000 per year. Ingredients would cost 20% of sales. d. Operating costs would include $77,000 per year for salaries, $4,200 per year for insurance, and $34,000 per year for utilities. In addition, Mr. Swanson would have to pay a commission to The Yogurt Place, Inc., of 11.0% of sales. Required: 1. Prepare a contribution format income statement that shows the…Cablevision has been approached by the City of Miranda to run its cable operations in 2023. After negotiating with key parties, CableVision has made the following agreements: It will offer Mirada residents a basic set of 25 cable television stations at a rate of $46.50 per month. It will pay the city $1,400,000 per year plus $4.12 per cable subscriber per month to maintain the physical facilities. It will pay another company a monthly fixed fee of $70,000 plus $8.25 per cable subscriber per month to broadcast the 25 channels. CableVision estimates that operating costs for billing, program news mailings, etc. will be $125,000 per month plus 8% of monthly revenue. CableVision has several questions about its monthly revenues, costs, and profits in 2023. 1. Assuming a tax rate of 32%, how many monthly subscribers would be required for CableVision to earn $297,000 per month in 2023? 2. Some of CableVision's managers are uncertain about their estimate of monthly fixed operating costs.…
- Tau Limited is a manufacturing business that sales high quality kitchen electronic products. Tau Limited has just entered into 25 lucrative contracts with customers in the SADC region. Each of the contacts includes the sale of one product for P3,000. To manufacture each of these products it cost Tau P2 000 a product. In the contacts, one of the terms is that cash is received upfront and control of the product transfers on delivery. Furthermore, customers can return the product within 30 days to receive a full refund. Tau still has an option of selling the returned products for profit. Tau Limited has been in business for many years and from his experience he can estimate returns for this product quite accurately. Tau has estimated that that 23 products will not be returned. Required: How should the above transaction be accounted for?Xaviery Computers is a franchisor and provides a range of computing services hardware/software installation, repairs, data backup, device syncing, and network solutions) on popular Samsung, Dell, Acer and other PC devices. Each franchise agreement gives a franchisee the right to opena Xaviery outlet and sell Xavierys' products and services in the area for five (5) years. Under the contract Xaviery also provides the franchisee with a number of services to support and enhance the franchise brand, including: advising and consulting on the operations of the store; communicating new hardware and software developments, and service techniques; providing business and training manuals; and advertising programs and training. As an almost entirely service operation (all materials and other supplies are purchased as needed by customers), Xaviery provides few upfront services to franchisees. Instead, the franchisee recruits service technicians, who are given Xavierys' training materials (online…Simple Rate of Return; Payback Period Paul Swanson has an opportunity to acquire a franchise from The Yogurt Place, Inc., to dispense frozen yogurt products under The Yogurt Place name. Mr. Swanson has assembled the following information relating to the franchise: a. A suitable location in a large shopping mall can be rented for $3,500 per month. b. Remodeling and necessary equipment would cost $270,000. The equipment would have a 15-year life and an $18,000 salvage value. Straight-line depreciation would be used, and the salvage value would be considered in computing depreciation. c. Based on similar outlets elsewhere, Mr. Swanson estimates that sales would total $300,000 per year. Ingredients would cost 20% of sales. d. Operating costs would include $70,000 per year for salaries, $3,500 per year for insurance, and $27,000 per year for utilities. In addition, Mr. Swanson would have to pay a commission to The Yogurt Place, Inc., of 12.5% of sales. Required: 1. Prepare a contribution…