Homework Answers
Ans:
Present Value of Future Installments = $ 5000 * PVIFA(10% , 5)
= $ 5000 * 3.7908
= $ 18,954
( PVIFA = (1-(1+r)^(-n) / r) where PVIFA = Present Value Interest Factor of Annuity
r = Interest rate per period
n = no. of periods
Q.1)
| Description | Debit | Credit |
| Cash(Initial payment) | $11,000.00 | |
| Note Receivable(future payment)(36000-11000) | $25,000.00 | |
| Discount on Note Receivable(25000 - 18954) | $6,046.00 | |
| Revenue from franchise fees(present value of future fees)(11000+25000-29954) | $29,954.00 |
Q2)
Case1:
| Description | Debit | Credit |
| Cash | $11,000.00 | |
| Note Receivable(future payment) | $25,000.00 | |
| Discount on Note Receivable | $6,046.00 | |
| Revenue from franchise fees(present value of future fees) | $29,954.00 |
Case2:
| Description | Debit | Credit |
| Cash | $3,800.00 | |
| Services Revenue | $3,800.00 |
Q3)
| Description | Debit | Credit |
| Cash | $11,000.00 | |
| Note Receivable(future payment) | $25,000.00 | |
| Discount on Note Receivable | $6,046.00 | |
| unearned franchise fees(present value of future fees) | $29,954.00 |
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