6. Which of the following is not considered separate performance obligation in relation to the franchise agreement? a. grant of franchise right b. delivery of kitchen equipment c. franchisor's promise to undertake activities to support the franchise d. all of these are considered as a single performance obligation
6. Which of the following is not considered separate performance obligation in relation to the franchise agreement? a. grant of franchise right b. delivery of kitchen equipment c. franchisor's promise to undertake activities to support the franchise d. all of these are considered as a single performance obligation
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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6. Which of the following is not considered separate performance obligation in relation to the franchise agreement?
a. grant of franchise right
b. delivery of kitchen equipment
c. franchisor's promise to undertake activities to support the franchise
d. all of these are considered as a single performance obligation
7. On Jan 1, how will the initial franchise fee be recorded?
a. credit contract liability of Php750,000
b. credit revenue of Php750,000
c. credit contract liability of Php600,000
d. credit revenue of Php150,000
8. How would the entity recognize revenue from the delivery of equipment?
a. in full on Jan 1, 2021
b. in full on Mar 1, 2021
c. in full on May 1, 2021
d. deferred and amortize over the franchise term starting May 1, 2021
9. Which of the following is correct in determining the satisfaction of performance obligations?
a. in the grant of franchise right, specific principles will be used
b. in the delivery of kitchen equipment, specific principles will be used
c. in the franchisor's promise to undertake activities, specific principles will be used
d. the general principle will be used for the performance obligations related to this franchise agreement
10. How much will be the total revenue to be recorded during 2021?
a. 850,000.00
b. 1,000,000.00
c. 600,000.00
d. 550,000.00
Transcribed Image Text:FOR PROBLEMS 6 TO 10
On Jan 1, 2021, an entity grants a franchisee the right to operate a restaurant using its trade name for a 3 year period.
The franchise agreement states an initial franchise fee of Php750,000, which includes Php150,000 for kitchen equipment
which the entity will purchase for the franchisee plus a 5% royalty based on the franchisee's sales. The entity promise
to undertake activities to support the franchise.
The entity delivers the equipment on March 1, 2021. The restaurant opens on April 1, 2021 at which date the
license period starts to run. The franchisee reports sales of Php5,000,000.00 for the year.
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