ABC Company sells franchise arrangements throughout Luzon and Visayas. Under a franchise agreement, ABC receives P600,000 in exchange for satisfying the following separate performance obligations: • Franchisees have a five-year right to operate as an ABC's retail establishment in an exclusive sales territory • Franchisees receive initial training and certification, and • Franchisees receive an ABC building and necessary equipment. The stand-alone selling price of the initial training and certification is P15,000, and P450,000 for the building and equipment. ABC estimates the stand-alone selling price of the five-year right to operate as an ABC establishment using the residual approach. ABC received P75,000 on July 1, 2022, from a customer and accepted a note receivable for the rest of the franchise price. ABC will construct and equip the customer's building and train and certify the customer by September 1, and the customer's five-year right to operate as an ABC establishment will commence on September 1 as well. How much of the transaction price will be allocated to the five-year right to operate as an ABC retail establishment? 585,000 O 135,000 O 150,000 O 600,000
ABC Company sells franchise arrangements throughout Luzon and Visayas. Under a franchise agreement, ABC receives P600,000 in exchange for satisfying the following separate performance obligations: • Franchisees have a five-year right to operate as an ABC's retail establishment in an exclusive sales territory • Franchisees receive initial training and certification, and • Franchisees receive an ABC building and necessary equipment. The stand-alone selling price of the initial training and certification is P15,000, and P450,000 for the building and equipment. ABC estimates the stand-alone selling price of the five-year right to operate as an ABC establishment using the residual approach. ABC received P75,000 on July 1, 2022, from a customer and accepted a note receivable for the rest of the franchise price. ABC will construct and equip the customer's building and train and certify the customer by September 1, and the customer's five-year right to operate as an ABC establishment will commence on September 1 as well. How much of the transaction price will be allocated to the five-year right to operate as an ABC retail establishment? 585,000 O 135,000 O 150,000 O 600,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:ABC Company sells franchise arrangements throughout Luzon and Visayas. Under a franchise agreement, ABC receives
P600,000 in exchange for satisfying the following separate performance obligations:
• Franchisees have a five-year right to operate as an ABC's retail establishment in an exclusive sales territory
• Franchisees receive initial training and certification, and
• Franchisees receive an ABC building and necessary equipment.
The stand-alone selling price of the initial training and certification is P15,000, and P450,000 for the building and
equipment. ABC estimates the stand-alone selling price of the five-year right to operate as an ABC establishment using
the residual approach. ABC received P75,000 on July 1, 2022, from a customer and accepted a note receivable for the
rest of the franchise price. ABC will construct and equip the customer's building and train and certify the customer by
September 1, and the customer's five-year right to operate as an ABC establishment will commence on September 1 as
well.
How much of the transaction price will be allocated to the five-year right to operate as an ABC retail establishment?
O 585.000
135,000
O 150,000
O 600,000
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education