decided to sell a combination of the t-shirt for $10 with a free hotdog. Donovan buys the combination of the t-shirt and the hotdog for $10 in cash. How should Franiuk account for the transaction?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Franiuk Hotdogs and Grill normally sells hotdogs for $2.00 but also t-shirts with the name of the business and
its logo prominently displayed for $10. The t-shirts haven't been selling that well lately, so Franiuk has
decided to sell a combination of the t-shirt for $10 with a free hotdog. Donovan buys the combination of the
t-shirt and the hotdog for $10 in cash. How should Franiuk account for the transaction?
O Franiuk should recognize $10 revenue, comprised of $10 for the t-shirt, $2 for the hotdog, and $2 as a liability.
Franiuk should recognize $12 revenue, comprised of $10 for the t-shirt, $2 for the hotdog, and $2 for discount expense.
O Franiuk should recognize $10 revenue, comprised of $8.33 for the t-shirt, $1.67 for the hotdog.
O Franiuk should recognize $10 revenue, comprised of $10 for the t-shirt, $0 for the hotdog.
Transcribed Image Text:Franiuk Hotdogs and Grill normally sells hotdogs for $2.00 but also t-shirts with the name of the business and its logo prominently displayed for $10. The t-shirts haven't been selling that well lately, so Franiuk has decided to sell a combination of the t-shirt for $10 with a free hotdog. Donovan buys the combination of the t-shirt and the hotdog for $10 in cash. How should Franiuk account for the transaction? O Franiuk should recognize $10 revenue, comprised of $10 for the t-shirt, $2 for the hotdog, and $2 as a liability. Franiuk should recognize $12 revenue, comprised of $10 for the t-shirt, $2 for the hotdog, and $2 for discount expense. O Franiuk should recognize $10 revenue, comprised of $8.33 for the t-shirt, $1.67 for the hotdog. O Franiuk should recognize $10 revenue, comprised of $10 for the t-shirt, $0 for the hotdog.
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