Valix Finacc vol 1 Problem 20-14

Financial Accounting Volume 1 2008 Valix-Peralta
Chapter 20 Problem 20-14

1.Franchise                                                                  20,000,000                                  

Cash                                                                                                                5,000,000          

Note payable                                                                                             15,000,000            

2. Note payable (15,000,000 / 4)                                                          3,750,000

    Interest expense (15,000,000 x 10%)                                                1,500,000

Cash                                                                                                                5,250,000

3.  There is no amortization because the franchise is for an indefinite period.