What is the journal entry on Jan. 15, 20x1? (Sunbathe Co. recognizes interest income only at year-end.) On January 1, 20x1, Sunbathe Co. enters into a contract with a customer to transfer a license.The initial franchise fee is P100,000 payable as follows: 20% cash down payment upon signing of thecontract and the balance is payable in 4 equal annual installments starting December 31, 20x1. Theappropriate discount rate is 12%.The contract states that the initial franchise fee consists of P30,000 consideration for the equipmentthat Sunbathe Co. will transfer to the customer and the P70,000 balance for the franchise rights.• Sunbathe Co. regularly sells the equipment and the license separately. The stand-alone selling pricesare P40,000 for the equipment and P38,000 for the license.The license provides the customer the "right to use" Sunbathe's intellectual property as it exists at thepoint in time at which the license is granted.The equipment is transferred to the customer on January 15, 20x1, while the license is transferred tothe customer on February 1, 20x1.

Answered: anchise fee consists of P30,000 conside…

anchise fee consists of P30,000 conside e customer and the P70,000 balance for ipment and the license separately. The 38,000 for the license.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Amortized Loans

The term "amortization" refers to spreading the value of a loan or a debt over a series of regular payments or installments comprising of both the principal and interest amount. It generally involves the process where in the value of a loan or an intangible asset is written down over its maturity period.

Question

What is the journal entry on Jan. 15, 20x1? (Sunbathe Co. recognizes interest income only at year-end.)

On January 1, 20x1, Sunbathe Co. enters into a contract with a customer to transfer a license.
The initial franchise fee is P100,000 payable as follows: 20% cash down payment upon signing of the
contract and the balance is payable in 4 equal annual installments starting December 31, 20x1. The
appropriate discount rate is 12%.
The contract states that the initial franchise fee consists of P30,000 consideration for the equipment
that Sunbathe Co. will transfer to the customer and the P70,000 balance for the franchise rights.
• Sunbathe Co. regularly sells the equipment and the license separately. The stand-alone selling prices
are P40,000 for the equipment and P38,000 for the license.
The license provides the customer the "right to use" Sunbathe's intellectual property as it exists at the
point in time at which the license is granted.
The equipment is transferred to the customer on January 15, 20x1, while the license is transferred to
the customer on February 1, 20x1.

Definition Definition Method of recording financial transactions in the book of original entry by debiting and crediting the accounts affected by a transaction using the golden rules of accrual accounting.

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