Pizza-Iz-Us Charges an Initial Fee of $1,800,000 for a Licensing

question 55

Essay

Pizza-Iz-Us charges an initial fee of $1,800,000 for a licensing contract, with $360,000 paid when the agreement is signed and the balance in four annual payments. The present value of the annual payments, discounted at 9%, is
$1,166,000. Included in the initial fee is a $50,000 allowance for promotional services to be provided by Pizza-Iz-Us during the next five years. The value of the advertising is $1,000 a month. Collectibility of the payments is reasonably assured and Pizza-Iz-Us has performed all the initial services required by the licensing contract.
Required:
Prepare the journal entry to record the initial licensing agreement including the initial cash receipt.

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Definitions:

Basic Anxiety

Anxiety created when a child is born into the bigger and more powerful world of older children and adults.

Personality Disturbances

Disruptions or dysfunctions in an individual's personality traits that significantly impede their social or occupational functioning.

Collective Unconscious

A concept in psychology proposed by Carl Jung, referring to the part of the unconscious mind that is inherited and common to all members of a species.

Freud's Unconscious

A key concept in Freudian psychology, referring to the part of the mind that contains desires, impulses, and memories of which individuals are not consciously aware.