On January 1, 2014, Heart Company signed an agreement to operate as a franchisee of Ace Company for an initial franchise fee of 12,000,000. The same date, Heart Company paid 4,000,000 and agreed to pay the balance in four equal annual payments of 2,000,000 beginning January 1, 2015. Heart Company can borrow at 10% for a loan of this type. What is the acquisition cost of the franchise? 8,720,000 10,340,000 9,820,000 5,360,000

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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On January 1, 2014, Heart Company signed an agreement to operate as a franchisee of Ace Company for an
initial franchise fee of 12,000,000. The same date, Heart Company paid 4,000,000 and agreed to pay the
balance in four equal annual payments of 2,000,000 beginning January 1, 2015. Heart Company can borrow
at 10% for a loan of this type. What is the acquisition cost of the franchise?
8,720,000
10,340,000
9,820,000
5,360,000
Transcribed Image Text:On January 1, 2014, Heart Company signed an agreement to operate as a franchisee of Ace Company for an initial franchise fee of 12,000,000. The same date, Heart Company paid 4,000,000 and agreed to pay the balance in four equal annual payments of 2,000,000 beginning January 1, 2015. Heart Company can borrow at 10% for a loan of this type. What is the acquisition cost of the franchise? 8,720,000 10,340,000 9,820,000 5,360,000
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