Help Save &ExitSubs; Pita Pal sells fast-food franchises. Pita Pal receives $69,
ID: 2555439 • Letter: H
Question
Help Save &ExitSubs; Pita Pal sells fast-food franchises. Pita Pal receives $69,000 from a new franchisee for providing initial training, equipment, and furnishings tha together have a stand-alone selling price of $69000 Pita Pai lso receives $34200 per year for use of the Pita Pal name and for ongoing Rachel had completed training and was open for business. How much revenue in 2018 will Pita Pal recognize for its arrangement with 1, 2018, and on May 1, 2018 Mutiple Choice $97500 Prev 4 f EE Next MacBook Air 5 6 7 8Explanation / Answer
The amount of revenue that Pita Pal will recognise for its arrangment with Rachel in the year 2018 is $97,500 as calculated below.
(1) Moeny received for providing initial training, equipment and furnishings = $69,000
This will be fully included in the revenue calculation as this amounts to a sale and hence revenue recognised.
(2) Money received for using the name and ongoing consulting services = $34,200 per year
Since the Franchise was purchased on 1st March 2018, therefore the revenue can be recognised only for 10 months i.e. from 1st March 2018 until 31st December 2018.
Total money received for full year = $34,200
Therefore, for 10 months = ($34,200/12)*10 = $28,500
Hence, total revenue to be recognised = $69,000 + $28,500 = $97,500
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