Assume the following data pertaining to Franchise agreement between Franchisor Mayang and Franchisee Mark at the start of 2017: Useful life of franchise 12 years Initial franchise fee 1,200,000 Downpayment 300,000 Balance payable in 6 equal installment ` 150,000 Implicit rate of borrowing 12% Present value of ordinary annuity of 1 for 6 periods 4.11 The note is a non-interest bearing note On December 31, 2017, the initial services required of the franchise agreement are substantially performed. The total cost of such services amounted to P229,125. Required; Compute the following; a. On the books of franchisee: 1. Cost of franchise _____________________ 2. Cash paid on 12/31/17 _____________________ 3. Amortization of franchise, 2017 _____________________ 4. Carrying amount of franchise, 12/31/18 _______________ b. On the books of the frnachisor 1. Total cash received by franchisor is 2017 ________________ 2. Interest income 2017 ________________ 3. Franchise fee revenue on 12/31/17 ________________ 4. Gross profit rate ________________ 5. Using installment method, realized Gross revenue on 12/31/17 ________________ 6. Balance of notes receivable on 12/31/18 ________________ 7. Rules in answering these problem_______
Assume the following data pertaining to Franchise agreement between Franchisor Mayang
and Franchisee Mark at the start of 2017:
Useful life of franchise 12 years
Initial franchise fee 1,200,000
Downpayment 300,000
Balance payable in 6 equal installment ` 150,000
Implicit rate of borrowing 12%
Present value of ordinary annuity of 1 for 6 periods 4.11
The note is a non-interest bearing note
On December 31, 2017, the initial services required of the franchise agreement are
substantially performed. The total cost of such services amounted to P229,125.
Required; Compute the following;
a. On the books of franchisee:
1. Cost of franchise _____________________
2. Cash paid on 12/31/17 _____________________
3. Amortization of franchise, 2017 _____________________
4. Carrying amount of franchise, 12/31/18 _______________
b. On the books of the frnachisor
1. Total cash received by franchisor is 2017 ________________
2. Interest income 2017 ________________
3. Franchise fee revenue on 12/31/17 ________________
4. Gross profit rate ________________
5. Using installment method, realized
Gross revenue on 12/31/17 ________________
6. Balance of notes receivable on 12/31/18 ________________
7. Rules in answering these problem_______
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