cpa-04677

Macklin Co. entered into a franchise agreement with Heath Co. for an initial fee of $50,000.  Macklin received $10,000 when the agreement was signed.  The balance was to be paid at a rate of $10,000 per year, starting the next year.  All services were performed by Macklin and the refund period had expired.  Operations started in the current year.  What amount should Macklin recognize as revenue in the current year?

Answer:  50,000
Franchisor should report revenue from initial franchise fees when...."substantially performed".

HOWEVER...because the payments are being made over time...wouldn't the 40,000 remaining payments to be received...need to be recorded at PRESENT VALUES??  I understand that the question didn't give us the factors in order to do this.  But I'm trying to make sure I am comprehending how this is to be worked given full information.  The example on page 14 (Chapter 2...Becker)....has a similar problem setup...yet the Franchisee & Franchisor recorded the present values.  Please advise.