Initial franchise fee charge of NAM of P1,700,000, requiring a P420,000 down payment when the agreement is signed and the balance is accounted in four annual payments. The present value of the annual payments, discounted at 10% is P1,014,000. An additional part of the initial franchise fee is for advertising to be provided by NAM for the next five years. The value of advertising is P2,000 a month. Collectability of the payment is reasonably assured and NAM has performed all the initial services required by the contract. How much revenue from the franchise fee is to be recognized when the agreement is signed?

Initial franchise fee charge of NAM of P1,700,000, requiring a P420,000 down payment when the agreement is signed and the balance is accounted in four annual payments. The present value of the annual payments, discounted at 10% is P1,014,000. An additional part of the initial franchise fee is for advertising to be provided by NAM for the next five years. The value of advertising is P2,000 a month. Collectability of the payment is reasonably assured and NAM has performed all the initial services required by the contract. How much revenue from the franchise fee is to be recognized when the agreement is signed?

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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