Nena’s Lechon, Inc. franchise, entered into franchise agreement with Aling Nene, franchisee, on March 31, 2023. The total franchise fee is P500,000, of which P100,000 is payable upon signing and the balance in four equal annual installments. The down-payment is refundable in the event the franchiser fails to render services and none thus far had been rendered. When Nena’s prepares its financial statements on March 31, 2023, the franchise fee revenue to be reported is:
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3.)
Nena’s Lechon, Inc. franchise, entered into franchise agreement with Aling Nene, franchisee, on March 31, 2023. The total franchise fee is P500,000, of which P100,000 is payable upon signing and the balance in four equal annual installments. The down-payment is refundable in the event the franchiser fails to render services and none thus far had been rendered. When Nena’s prepares its financial statements on March 31, 2023, the franchise fee revenue to be reported is:
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- A Franchisor entered into a franchise agreement with B, franchisee, on March 31, 2021. The total franchise fee is P500,000, of which P100,000 is payable upon signing and the balance in four equal annual installments. The down payment is refundable in the event the franchisor fails to render services and none thus far had been rendered. When B's prepares its financial statements on March 31, 2021, the franchise fee revenue to be reported is?On January 1, 2022, Heeseung Ramen Shop granted a franchise to a franchisee. The franchise agreement required the franchisee to pay a nonrefundable upfront fee in the amount of P550,000. The franchisee paid the upfront fee immediately on January 1, 2022. A continuing franchise fee of 10% based on annual sales is to be paid by the franchisee. It is the obligation of Heeseung Ramen Shop to construct a franchise stall, provide the franchisee a right to access the trade name for a period of five years and to deliver 10,000 kg. of ramen noodles to the franchisee. On October 1, 2022, Heeseung already finished construction of the stall. During 2022, 2,000 kilos of ramen noodles were delivered. The franchisee reported sales of P2,000,000 during 2022. The stand-alone prices are determined as follows: · Tradename – P400,000 · Ramen noodles – P150,000 · Stall – Not directly observable Based on the current market conditions, it was estimated that a customer in the market is willing…1.) On November 30, 2022, Loveless Company authorized NBSB Corp. to operate as a franchisee for an initial franchise fee of P1,950,000. Of his amount, P750,000 was received upon signing the agreement, and the balance, represented by a note, is due in four annual payments starting November 30, 2023. Present value of P1 at 12% for 4 periods is 0.6355. Present value of an ordinary annuity of P1 at 12% for 4 periods is 3.0374. The period of refund will elapse on January 31, 2023. The franchisor has performed substantially all the initial services, but the operations of the store have yet to start. Collectability of the note is reasonably certain. Required: a.) How much is the unearned franchise fee on the year ended December 31, 2022?b.) How much is the earned franchise fee for the year ended December 31, 2022?
- On January 1, 2022, ABC Company granted a franchise to a franchisee. The franchise agreement required the franchisee to pay a nonrefundable upfront fee in the amount of P600,000 under the following payment scheme: January 1, 2022 P100,000 January 1, 2023 300,000 January 1, 2024 150,000 January 1, 2025 25,000 January 1, 2026 25,000 The franchise agreement also provides that interest of 2% per annum will be paid every January 1 based on the unpaid balance. The effective interest rate is 2.5%. Under the franchise agreement, the franchisor is required to do the following: Construct the franchisee’s stall with a stand-alone price of P400,000. Deliver equipment and supplies to the franchisee with a stand-alone price of P150,000. Allow the franchisee to use the tradename for a period of five years starting in 2022 with a stand-alone price of P250,000. ABC Company considers each of the following items above as a distinct performance obligation that is…On January 1, 2021, an entity granted franchise to a franchisee. The franchise agreement requires the franchisee to pay a non-refundable initial franchise fee of P1,500,000 and sales-based royalty of 8% of the sales of the franchisee. The franchisee paid P500,000 upon signing of the agreement and the balance payable in four equal annual installments starting December 31, 2021. The franchisee’s credit rating indicates that he can borrow money at 7% for a loan of this type. In relation to the non-refundable initial franchise fee, the franchise agreement required the entity to render the following distinct performance obligations: · To construct the franchisee’s stall with stand-alone selling price of P600,000. · To deliver 20,000 units of raw materials to the franchisee with stand-alone selling price of P750,000. · To allow the franchisee the access to the entity’s tradename for a period of ten years starting January 1, 2021 with stand-alone selling price of…Each of Potter Pie Co.'s 21 new franchisee contracted to pay an initial franchise fee of P30,000. By December 31, 2020, each franchisee had paid a non-refundable P10,000 fee and signed a note to pay P10,000 principal plus the market rate of interest on December 31, 2021 and December 31, 2022. Experience indicates that one franchise will default on the additional payments. Services for the initial franchise fee will be performed in 2021. What amount of net unearned franchise fees would Potter report at December 31, 2020? a.610,000 b.600,000 c.630,000 d.400,000
- 1. On January 1, 2020, Sheffield signed an agreement to operate as a franchisee of Hsian Copy Service, Inc. for an initial franchise fee of $100,000. Of this amount, $20,000 was paid when the agreement was signed, and the balance is payable in 4 annual payments of $20,000 each, beginning January 1, 2021. The agreement provides that the down payment is not refundable and no future services are required of the franchisor. The present value at January 1, 2020, of the 4 annual payments discounted at 12% (the implicit rate for a loan of this type) is $60,750. The agreement also provides that 6% of the revenue from the franchise must be paid to the franchisor annually. Sheffield’s revenue from the franchise for 2020 was $840,000. Sheffield estimates the useful life of the franchise to be 10 years. (Hint: You may want to refer to Chapter 18 to determine the proper accounting treatment for the franchise fee and payments.) 2. Sheffield incurred $60,000 of experimental and development…On June 1, 2020, Chesnaught entered into a franchise agreement with Quilladin Inc. to sell their products. The agreement provides for an initial franchise fee of P3,000,000 which is payable as follows: P1,000,000 cash to be paid upon signing the contract, and the balance in four equal annual installments every December 31, starting in 2020, Chesnaught signs a non-interest bearing note for the balance. The credit, rating of the franchisee indicates that the money can be borrowed at 10%. The present value factor of an ordinary annuity at 10% for 4 periods is 3.1698. The agreement further provides that the franchisee must pay a continuing franchise fee equal to 5% of its monthly gross sales over the six years licensing period. Quilladin incurred direct cost of P930,564 and indirect costs of P167,400. The franchisee started business operations on July 1, 2020 and was able to generate sales of P1,240,000 for 2020. The first installment payment was made in due date. Assuming that the…Mina's Kitchen, Inc. franchise, entered into franchise agreement with Aling Mina, franchisee, onMarch 31, 2019. The total franchise fee is P500,000, of which P100,000 is payable upon signing andthe balance in four equal annual installments. The down-payment is refundable in the event thefranchiser fails to render services and none thus far had been rendered. When Mina's prepares itsfinancial statements on March 31, 2019, the franchise fee revenue to be reported is:
- 1. On December 31, 2020, Rice, Inc. authorized Graft to operate as a franchisee for an initial franchise fee of P150,000. Of this amount, P60,000 was received upon signing of the agreement and the balance, represented by a note, is due in three annual payments of P30,000 each beginning December 31, 2021. The present value on December 31,2020 of the three annual payments appropriately discounted is P72,000. According to the agreement, the non- refundable down payment represents a fair measure of the services already performed by Rice; however, substantial future services are required of Rice. Collectability of the note is reasonably certain. a. in Rice’s December 31, 2020 balance sheet, unearned franchise fees from Graft’s franchise should be reported as?1. On December 31, 2020, Rice, Inc. authorized Graft to operate as a franchisee for an initial franchise fee of P150,000. Of this amount, P60,000 was received upon signing of the agreement and the balance, represented by a note, is due in three annual payments of P30,000 each beginning December 31, 2021. The present value on December 31,2020 of the three annual payments appropriately discounted is P72,000. According to the agreement, the non-refundable down payment represents a fair measure of the services already performed by Rice; however, substantial future services are required of Rice. Collectability of the note is reasonably certain. a. in Rice’s December 31, 2020 balance sheet, unearned franchise fees from Graft’s franchise should be reported as? 2. Levi and Zeke agreed on a joint venture to purchase and sell car accessories. Their contract stipulates that the participants shall contribute P25,000 each to be used in purchasing the merchandise, share equally in any gain or…Dominos Pizza, franchisor, entered into a franchise agreement with Kabayan Co., franchisee, on July 1, 2021. The total franchise fees agreed upon is P1,100,000, of which P100,000 is payable upon signing and the balance payable in four equal annual installments. It was agreed that the down payment is not refundable, notwithstanding lack of satisfaction of any performance obligation by the franchisor. When Dominos prepares its financial statements on July 31, 2020, the unearned franchise fees to be reported is how much?