accounting problem:

Question

accounting problems: 1. On Jan. 1, 2014, HBC signed an agreement to operate as a franchise of ABS Co. for an initial franchise fee of 12,000,000. The same date HBS paid 4,000,000 and agreed to pay the balance in four equal annual payments of 2000,000 beggining Jan. 1,2015. The down payment is not refundable and no future services are required of the franchisor. HBS can borrow at 14% for a loan of this type. present and future value factors are as follows:

 

PV of 1 @ 14% for 4 periods                             0.59

future amount of 1 @ 14% for 4 periods            1.69

PV of an ordinary annuity of 1 @ 14% for

4 periods                                                         2.91

 

what is the acquisition cost of the franchise?

 

2. on jan. 1,2014, BBC co. had capitalized cost of 5,000,000 for a new computer software product with an economic life of 5 yrs. sales for 2014 amounted to 3,000,000. the total sales of software over its economic life are expected to be 10,000,000. the pattern of future sales cannot be measured reliably. on dec. 31,2014, the software had a net realizable value of 4,500,000. what is the carrying amount of the computer software on dec. 31,2014?

 

3. Kfc company purchased 2 machines for 250,000 each on jan 2, 2012. the machines were put into use immediately. machine A has a useful life of 5 years and can only be used in one research project. machine B will be used for 2 years on a research & development project and then used by the production division for an additional year. KFC uses straight line method of depreciation. what amount should KFC include in 2012 research and development expense?

 

Answer 1

Do you need help of do you just want someone to do your work? What don't you understand here? where is your attempt at a solution

 

1. Use the prevent value of an annuity to discount the remaining four payments to the present. Add the amount already paid and you get the cost of the franchise. $11,881,970

 

2. Look up the rules for capitalizing or expensing software developed for sale versus software developed for use by the software owner.

Answer 2

 

Q1,  Acquisition Cost :  

       calculate PV of downpayment plus FV of annual installments @ 14% APR

        

Q2,  Carrying Amount :

       use Net Realizable Value

  

Q3,  2012 research and development expense :

       depreciate cost of machines using straight line method over 5 years..

       or, write off cost of machines as an expense for the year incurred..