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Asset and Liability Recognition and Measurement

Asset and liability recognition and measurement. After winning "America's Next Top Model" in 2006, Danielle Evans signed a contract with Ford Models, was named a spokes model for CoverGirl, and signed a contract for a photo spread in Elle magazine. Although Ford did not disclose the details of the contract, typical terms would provide for payments of $500,000 for each of the next three years. Assume that the present value of these payments is $1.2 million. At the time that Danielle signs the contract, Ford Models also provides her with a BMW M3 convertible sports car, valued at $70,000. How should Ford Models treat this contract at the time of signing?

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Ford Models should treat the contract as a liability for accounting purposes. A liability is a current obligation because of a past event. In this ...

Solution Summary

An examination of a contract for a super model being either an asset or a liability recognition.