Question

Marin Inc., a registered broker, enters into a finder’s fee agreement with HOM Homes Ltd. on June 15, 2020. Marin will find leads in the form of buyers potentially interested in purchasing HOM’s real estate holdings. Along with finding potential buyers, Marin helps negotiate the selling price and provides advice on contract details. If and when HOM closes a sale, Marin will be paid within 30 days of the closing date, based on the following formula: 5% of any transaction value up to and including $1 million, plus 4% of any transaction value greater than $1 million and less than and including $2 million, plus 3% of any transaction value greater than $2 million and less than and including $3 million, plus 2% of any transaction value greater than $3 million and less than and including $4 million, plus 1% of any transaction value in excess of $4 million. If Marin is represented by another broker and this information is not shared with HOME, the fee is reduced by 50%. On September 1, 2020, HOM paid Marin $62,000 to provide some needed cash flow for seeking out buyers. On October 15, 2020, an offer was made and accepted for a parcel of real estate at a price of $3.55 million. The transaction closed on November 1, 2020, and Marin was paid the finder’s fee net of $62,000 on November 30, 2020.

Determine the accounting treatment of the above events for Marin Inc. and prepare any journal entries needed on

.June 15, 2020

b.September 1, 2020

c.October 15, 2020

d.November 1, 2020

e.November 30, 2020

Answer 1

Marin Inc., a registered broker
Agreement date:	15-Jun-20
Responsibility of Marin
finding potential buyers
Marin helps negotiate the selling price
provides advice on contract details
When HOME Closes a sale
within 30 days of the closing date		In case informations not shared with HOMES
Range of Transactin value	%	%
<= 1 Million	5%	2.50%
>1 million <=2 Million	4%	2.00%
>2 million <=3 million	3%	1.50%
>3 million <=4 million	2%	1.00%
>4 million	1%	0.50%
Transaction date & Details	Journal entries
June 15, 2020
Agreement date	No journal entries required
September 1, 2020
HOM paid Marin $62,000 to provide some needed cash flow for seeking out buyers	Cash / Bank A/c ……….Dr 62000
	To HOMES A/c 62000
Being advance received to meet expenses
October 15, 2020	No journal entries required
This is because no rights to receive generated on 15th Oct
November 1, 2020			Calculation of finder's fees
The transaction closed on November 1, 2020 and transaction value was 3.55 million			1 million	5%	0.05
Journal entry will be	HOMES A/C…………DR 0.131 million		next 1 million	4%	0.04
	TO BROKERAGE or Finder fees A/C 0.131 million		next 1 million	3%	0.03
			Rest .55 million	2%	0.011
					0.131	Million
				or	$ 1,31,000.00
November 30, 2020
Marin was paid the finder’s fee net of $62,000 on November 30, 2020.	CASH OR BANK A/C……….DR     69000
	TO HOMES A/C 69000
Net amount I.e. 131000-62000 is paid