On July 1 2012 Ed Wynne signed an agreement to

On July 1, 2012, Ed Wynne signed an agreement to operate as a franchisee of Kwik Foods,

Inc., for an initial franchise fee of $240,000. Of this amount, $80,000 was paid when the
agreement was signed and the balance is payable in four equal annual payments of $40,000
beginning July 1, 2013. The agreement provides that the down payment is not refundable and
no future services are required of the franchisor. Wynne's credit rating indicates that he can
borrow money at 14% for a loan of this type. Information on present and future value factors is
as follows: Present value of 1 at 14% for 4 periods 0.59 Future value of 1 at 14% for 4 periods
1.69 Present value of an ordinary annuity of 1 at 14% for 4 periods 2.91 Wynne should record
the acquisition cost of the franchise on July 1, 2012 at A) $174,400 B) $270,400 C) $196,400 D)
$240,000View Solution:
On July 1 2012 Ed Wynne signed an agreement to
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