Wigs and Torys Plc

question 104

Multiple Choice

Wigs and Torys Plc.is a leading operator of pubs and pub restaurants in the United Kingdom.It operates and franchises about 10 wine restaurants under the name Bottoms Up Bar, primarily in London.Suppose that in contracting with a franchisee of an Bottoms Up Bar wine restaurant, Wigs and Torys agrees to provide services, including site selection, décor design, marketing, advertising, and recruiting; and the franchisee agrees to pay Wigs and Torys £100,000.It is common in the industry to permit the franchisee to pay in equal installments over several years.When should Wigs and Torys recognize revenue from the franchisee contract?

• A)at the time Wigs and Torys Plc.signs the contract with the franchisee
• B)as the cash is received by Wigs and Torys from the franchisee
• C)as the income is earned by Wigs and Torys
• D)at the end of the franchise period
• E)half should be recognized when Wigs and Torys Plc.signs the contract with the franchisee and the other half after all the installments are received

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Definitions:

Disposable Income

The capital households have left for spending and saving after paying income taxes.

Disposable Income

The financial capacity of households to spend and save, net of income taxes.

Savings

The part of earnings not used for purchasing goods or services, typically saved for investing or future needs.

Disposable Income

Indicates the sum of funds households can allocate towards expenditure and savings once income taxes have been deducted.