On January 1, MU separately entered into a non-exclusive licensing agreement with KH. The licensing agreement allows
Question:
On January 1, MU separately entered into a non-exclusive licensing agreement with KH. The licensing agreement allows KH the right to use the MU-trademarked logo on aprons and chef hats for a two-year period. MU also plans to spend $1 million during the two-year period on advertising its products with the logo. The rights and terms granted by MU to KH are similar to those granted by MU in licensing agreements with various other companies. KH paid MU a one-time fee of $12,000 on January 1 at the inception of the two-year licensing period.
Requirement
You are asked to advise MU on how revenue related to the KH licensing agreement should be recognized during January. Suggest journal entries and disclosures, if required. Your memo should be based on current GAAP.
Smith and Roberson Business Law
ISBN: 978-0538473637
15th Edition
Authors: Richard A. Mann, Barry S. Roberts