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
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![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](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe33b8a15-b2de-471b-920a-011f0496d269%2F7b639ef7-847f-42c5-8eef-333a4fc26139%2Fvmp5p6j_processed.jpeg&w=3840&q=75)
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
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