Fred Esquillo, Inc charges an initial franchise fee of P90,000 broken down as follows: Rights to trade name, market area, and proprietary know-how . . . . . . . . . P40,000 Training services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,500 Equipment (cost of P10,800) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,500 Total initial franchise fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P90,000 Upon signing of the agreement, a payment of P40,000 is due. Thereafter, two annual payments of P30,000 are required. The credit rating of the franchisee is such that it would have to pay interest of 8% to borrow money. The franchise agreement is signed on August 1. 20x7. Assuming that no future services are required by the franchisor once the franchise begins operations, the entry on November 1, 20x7 would include
Fred Esquillo, Inc charges an initial franchise fee of P90,000 broken down as follows:
Rights to trade name, market area, and proprietary know-how . . . . . . . . . P40,000
Training services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,500
Equipment (cost of P10,800) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,500
Total initial franchise fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P90,000
Upon signing of the agreement, a payment of P40,000 is due. Thereafter, two annual payments of
P30,000 are required. The credit rating of the franchisee is such that it would have to pay interest of
8% to borrow money. The franchise agreement is signed on August 1. 20x7. Assuming that no future
services are required by the franchisor once the franchise begins operations, the entry on November
1, 20x7 would include
-A credit to Unearned Franchise Revenue for P40,000.
-A debit to Service Revenue for P11,500.
-A debit to Sales Revenue for P38,500.
-A debit to Unearned Franchise Revenue for P41,000.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
