le when the agreement was signed and the balance in five annual payments of P8,000 each. Tam's is expected to provide continu chise during the contract period. The credit rating of the franchisee indicates that money can be borrowed at 8%. The present valu of five receipts of P8,000 each discounted at 8% is P31,942. uary 1, 2020, Tam's signed a franchise agreement with Tim's. The agreement further provides that Tam's is entitled to a 3% sales- ember 31, 2020, Tim's reported sales of P628,000. gning of the contract with Tim's, Tam's records deferred franchise revenue in an amount of
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- Tam's Pizza, Inc. charges an initial franchise fee of P50,000 for the right to operate as a franchisee of Tam's Pizza for five years. Of this amount, P10,000 is payable when the agreement was signed and the balance in five annual payments of P8,000 each. Tam's is expected to provide continuing services to the franchise during the contract period. The credit rating of the franchisee indicates that money can be borrowed at 8%. The present value of an ordinary annuity of five receipts of P8,000 each discounted at 8% is P31,942. On February 1, 2020, Tam's signed a franchise agreement with Tim's. The agreement further provides that Tam's is entitled to a 3% sales-based royalty. On December 31 , 2020, Tim's reported sales of P628,000.Pacific Crossburgers Inc. charges an initial fee of P70,000. Upon the signing of the agreement (which covers 3 years), a payment of P28,000 is due. Thereafter, three (3) annual payments of P14,000 are required. The credit rating of the franchisee is such that it would have to pay interest at 10% to borrow money. The franchise agreement signed on May 1, 20x5, and the franchise commences operation on July 1, 20x5. Assuming that the total franchise fee includes training services (with a value of P2,400) for the period leading up to the franchise opening and for two (2) months following opening.Pacific Crossburgers Inc. charges an initial franchise fee of $70,000. Upon the signing of the agreement (which covers 3 years), a payment of $28,000 is due. Thereafter, three annual payments of $14,000 are required. The credit rating of the franchisee is such that it would have to pay interest at 10% to borrow money. The franchise agreement is signed on May 1, 2020, and the franchise commences operation on July 1, 2020. Instructions Prepare the journal entries in 2020 for the franchisor under the following assumptions. (Round to the nearest dollar.) a. No future services are required by the franchisor once the franchise starts operations. b. The franchisor has substantial services to perform, once the franchise begins operations, to maintain the value of the franchise. c. The total franchise fee includes training services (with a value of $2,400) for the period leading up to the franchise opening and for 2 months following opening.
- On January 1, 20x1, Marc Company enters into a contract with a customer to transfer a license. The initial franchise fee is P200,000, payable as follows: 20% cash down payment upon signing of the contract, and the balance is payable in four (4) equal annual installments starting December 31, 20X1. The appropriate discount rate is 10%. The contract also requires Marc Company to transfer equipment to the customer. The equipment has a cost of P30,000 and a stand-alone selling price of P50,000. The license has a stand-alone selling price of P38,000. Marc Company regularly sells the license and the equipment separately. The equipment is transferred to the customer on January 15, 20x1, while the license is transferred to the customer on February 1, 20x1. REQUIRED: Compute the following: 1. Total transaction price 2. Transaction price allocated to license 3. Transaction price allocated to equipment 4. Franchise fee revenueOn January 1, 20x1, Marc Company enters into a contract with a customer to transfer a license. The initial franchise fee is P200,000, payable as follows: 20% cash down payment upon signing of the contract, and the balance is payable in four (4) equal annual installments starting December 31, 20X1. The appropriate discount rate is 10%. The contract also requires Marc Company to transfer equipment to the customer. The equipment has a cost of P30,000 and a stand-alone selling price of P50,000. The license has a stand-alone selling price of P38,000. Marc Company regularly sells the license and the equipment separately. The equipment is transferred to the customer on January 15, 20x1, while the license is transferred to the customer on February 1, 20x1. REQUIRED: Total transaction price Transaction price allocated to license Transaction price allocated to equipment Franchise fee revenuePina Universe charges an initial franchise fee of $ 234,000. Upon the signing of the agreement, a payment of $ 26,000 is due. Thereafter, 5 annual payments of $ 41,600 are required. The credit rating of the franchisee is such that it would have to pay interest at 9% to borrow money. The franchise agreement is signed on August 1, 2020, and the franchise commences operation on October 1, 2020. Prepare the journal entries in 2020 for the franchisor under the following assumptions. a. No future services are required by the franchisee once the franchise starts operations. b. The franchisor has substantial services to perform, once the franchise begins operations, to maintain the value of the franchise. c. The total franchise fee includes training services (with a value of $ 6,900) for the period leading up to the franchise opening and for 2 months following opening
- 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. Provide journal…Sunland Inn charges an initial fee of $ 2,448,000 for a franchise, with $ 489,600 paid when the agreement is signed and the balance in four annual payments. The present value of the annual payments, discounted at 10%, is $ 1,551,000. The franchisee has the right to purchase $ 91,800 of kitchen equipment and supplies for $ 76,500. An additional part of the initial fee is for advertising to be provided by Sunland Inn during the next five years. The value of the advertising is $ 1,020 a month. Collectibility of the payments is reasonably assured and Sunland Inn has performed all the initial services required by the contract.Prepare the entry to record the initial franchise feePizza Pie Inc. entered into a franchise agreement on December 31, 2029, giving Freshly Bake Corp. the right to operate as a franchise of Pizza Pie for 5 years. Pizza Pie charged Freshly Bake an initial franchise fee of P50,000 for the right to operate as a franchisee. Of this amount P20,000 is payable when the food fight signs the agreement, and the note balance is payable in five annual payments of P6,000 each starting on December 31, 2020, as part of the arrangement. Pizza helps locate the site, negotiate the lease or purchase of the site, supervise the construction activity, and provide employee training and the equipment necessary to be a distributor of its products. Similar training services and equipment are sold separately. Freshly Bake also promises to pay ongoing royalty payments of 1% of its annual sales (payable each Jan. 31 of the following year) and is obliged to purchase products from pizza at its current stand-alone selling price at the same time of purchase. The credit…
- NAPA WINERY charges an initial fee of P5M for a franchise with P2M paid when the agreement is signed and the balance in three annual payments. The present value of the annual payments, discounted at 15% is P2,283,200. The franchisee has the right to purchase P750,000 winery equipment and barrels for P690,000. An additional part of the initial fee is advertising to be provided by NAPA during the next three years. The value of the advertising is P250,000 per annum. Collectability of the note is reasonably assured and NAPA has performed all the initial services stated in the contract. What is the amount of the revenue from franchise fee? a.3,473,200 b.4,223,200 c.4,940,000 d.3,533,200On July 1, 2021, Blue Company signed an agreement to operate as a franchisee for a franchise fee of P5,000,000. Of this amount, P2,000,000 was paid when the agreement was signed and the balance is payable in six semi-annual payments of P500,000 every Dec. 31, and June 30. The first payment was due on Dec. 31, 2021. Blue Company’s credit rating indicates that it can borrow money at 8% per annum for a loan of this type. Information on present value factors (PV) are:PV of an ordinary annuity of 1 at 8% for 3 periods-----------2.5771 PV of an ordinary annuity of 1 at 4% for 6 periods-----------5.2421What is the cost of Franchise acquired on April 1, 2021?Burger King granted a franchise to Shakers where Shakers will have to pay franchise fee of P5,000,000 payable in four equal annual installments with the first payment starting on the date of signing the contract. The franchisee was to pay 5% of gross sales of the preceding month. Should the operations of the outlet prove to be unprofitable, the franchise may be cancelled with whatever obligation owing Burger King, in connection with the P5,000,000 franchise fee waived. If the first year of operations generated a gross sales of P1,340,000, what amount of franchise fee did Burger King earn? The Skyline Corporation began constructing a building with a contract price of P 43,800,000 in 2009. The ledgers of Skyline for 2010 shows the following accounts: Construction in Progress P 10,400,000 Accounts Receivable 3,200,000 Gross Profit earned 3,952,000 Progress billings to date 6,500,000. What was the amount of collection in 2009?