Part III:

Part II should be completed before beginning Part III.

Background

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 1at the inception of the two-year licensing period.

Requirements

• Review ASC 606-10-55-54 through 64. Prepare a detailed explanation of each of the five steps of revenue recognition. Record all initial accounting entries for MU for the month of January based on the new guidance on revenue recognition in ASC 606. Include references to the guidance to support your proposed accounting. Show any calculations you make to support your journal entries.