On December 31, 2019, Entity A enters into a contract with Customer B to transfer a license for a fixed fee of P100,000 payable as follows: • 20% is payable upon signing of contract. • 80% is represented by a note receivable collectible in 4 equal annual installments starting December 31, 2020. The appropriate discount rate is 12% (Use PV facto = 3.0375) The license provides Customer B the right to use Entity A's patented processes. Customer B continues to operate using its trade name and has the discretion of developing a new product name for the products it will produce

On December 31, 2019, Entity A enters into a contract with Customer B to transfer a license for a fixed fee of P100,000 payable as follows: • 20% is payable upon signing of contract. • 80% is represented by a note receivable collectible in 4 equal annual installments starting December 31, 2020. The appropriate discount rate is 12% (Use PV facto = 3.0375) The license provides Customer B the right to use Entity A's patented processes. Customer B continues to operate using its trade name and has the discretion of developing a new product name for the products it will produce

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter17: Advanced Issues In Revenue Recognition

Section: Chapter Questions

Problem 7C: On January 1, 2019, Mopps Corp. agrees to provide Conklin Company 3 years of cleaning and janitorial...

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On January 1, 2019, Fulton Inc. enters into a contract with Gibson to deliver goods. Gibson pays $100,000 at the time the contract is signed, at which time the goods are transferred and Fulton’s performance obligation is complete. In addition, Gibson agrees to pay Fulton $100,000 on December 31, 2019, and December 31, 2020. If Fulton entered into a financing arrangement with Gibson it would charge an interest rate of 9%. Please assist with the journal entries. Thank you! There are 8 journal entries in all.
On January 1, 2020, ABC enters into a contract with a customer to transfer a license for a fixed fee if P400,000 payable in 2 equal annual payments starting Dec 31, 2020. The relevant discount rate is 15%. The license was transferred to the customer on Jan 1, 2021 and allows the customer the right over the intellectual property as it exists on grant date. Direct costs incurred during 2020 and 2021 are P34,000 and P58,000 respectively. On the other hand, indirect costs during the 2020,2021, and 2022 are P52,000, P24,000, and P33,000 in order. How much should ABC report as net profit for the year 2021?
Bruno Mars Company enters into a contract with John Legend to deliver Products X and Y in exchange for a non- interest bearing note with a face value of P192,685.38, on January 1, 2020. Product X will be delivered in December 31, 2021 and Product Y in December 31, 2024. Upon delivery of product X, Bruno Mars will receive P42,135 and the remaining P150,550.38 will be received upon delivery of Product Y. The contract is non-cancellable. Bruno normally sells Product X at P43,750 cash price equivalent while Product Y can be sold at P131,250. Nonetheless, due to the nature of the bundled purchase, John Legend is given a favorable pricing. A financing rate of 6% is appropriate based on Bruno’s credit-standing at contract inception. Bruno uses December 31 as its year end. How much total revenue can Bruno report in its December 31, 2021 income statement? How much total revenue can Bruno report in its December 31, 2024 income statement?
On November 30, 2019, Garry Company authorized BSCO Corp. to operate as a franchisee for aninitial franchise fee of P1,950,000. Of his amount, P750,000 was received upon signing the agreementand the balance, represented by a note, is due in four annual payments starting November 30, 2020.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, 2020. The franchisor hasperformed substantially all the initial services, but the operations of the store have yet to start.Collectability of the note is reasonably certain.a. How much is the unearned franchise fee on the year ended December 31, 2019?b. How much is the earned franchise fee for the year ended December 31, 2019?
During 2018, the entity billed the customer equivalent to 30% of the contract price. During 2019, the entity billed again the customer amounting to 20% of the contract price. During 2020, the entity billed again the customer amounting to 40% of the contract price. The remaining billing was made at the year of completion of the project. The entity made collection from the customer at the end of 2018, 2019 and 2020, in the amount of P120,000, P450,000 and P180,000, respectively. The entity provided the following data concerning the direct costs related to the said project: 2020 2018 2019 Cumulative costs incurred at year-end 360,000 800,000 870,000 Remaining estimated costs to complete at year- 840,000 250,000 50,000 end What is the realized gross profit for the year ended December 31, 2019? Group of answer choices 50,000 150,000 200,000
On December 31, 2019, Pepe Company signed an agreement to operate as franchise of Annie’s for afranchise fee of P80,000. Of this amount, P30,000 was paid upon signing of the agreement and thebalance is payable in five annual payments of P10,000 each beginning December 31, 2019. Thepresent value of the five payments, at an appropriate rate of interest, is P36,000 on December 31,2019. The agreement provides that the down payment is not refundable, and no future services arerequired of the franchisor. The collection of the note receivable is reasonably certain. Annie’sCompany should report unearned revenue from franchise fee in its December 31, 2019, balance sheetat:
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On October 10, 2020, Flounder Co. entered into a contract with Belisle Inc. to transfer Flounder’s specialty products (sales value of $9,200, cost of $6,500) on December 15, 2020. Belisle agrees to make a payment of $5,400 upon delivery and signs a promissory note to pay the remaining balance on January 15, 2021. What entries does Flounder make in 2020 on this contract?
Ping Inc. granted a franchise to Tito Inc. to operate its registered business of barbershop. The contract was signed on January 1, 2020 with initial franchise fee of P 500,000 payable in P 200,000 cash and the balance in five equal semi-annual installments every June 30 and December 31. The non-interest bearing promissory note (reasonably assured) has implicit rate of 10% (PVF = 4.32948). The contract provides that Tito Inc. shall pay a contingent franchise fee equal to 5% of the revenue from the barbershop. Tito Inc. reported a revenue in the amount of P 100,000 during the 2020. Ping Inc. has substantially performed all the services required under the franchise contract. What is the total income to be recognized by Ping Inc. for the year ended December 31, 2020 ?
DBC Company has received a confirmation letter from the First National Bank of Miami (FNBM) about a line of credit for $12,000,000 on January 2, 2020. According to the terms of this short-term loan, DBC Company will be charged the following: A. ABC will be charged for 50 basis points interest (on an annual basis) for any unused amount of credit from the commencement of this agreement. B. Upon usage of any funds, the interest charge will be Prime rate plus 75 basis points. Prime rate at the commencement of this loan on January 2, 2020, was 5.25%. C. The following events took place in 2020: 1) On February 1, 2020; DBC Co., used $4,000,000 against its line of credit for its working capital purposes. 2) On May 1, 2020; DBC Co., used an additional $2,400,000 to purchase fixed assets. 3) On June 1, 2020, upon the meeting of F.O.M.C., the Fed announced its "Quantitative Easiness" policy and reduced the discount rate by 0.50 basis points. Immediately FNBM bank reflected the same reduction to…
On December 31, 2018, Turks Company signed an agreement to operate as franchisee of Wendy's for a franchise fee of P80,000. Of this amount, P30,000 was paid upon signing of the agreement and the balance is payable in five annual payments of P10,000 each beginning December 31, 2019. The present value of the five payment, at an appropriate rate of interest, is P56,000 at December 31, 2018. The agreement provides that the down payment is not refundable and no future services are required of the franchisor. The collection of note receivable is reasonably certain. Wendy's Company should report unearned revenue from franchise fee in its December 31, 2019 balance sheet at: Select the correct response: P80,000 P66,000 P30,000
On December 11, 2019, Hooper Inc. made a credit sale to Marshall Company and required Marshall to sign a $27,000, 60-day note. Required: Prepare the journal entries necessary to record the receipt of the note by Hooper, the accrual of interest on December 31, 2019, and the customer’s repayment on February 9, 2020, assuming: 1. Interest of 9% was assessed in addition to the face value of the note. 2. The note was issued as a $27,000 non-interest-bearing note with a present value of $26,598. The implicit interest rate on the note receivable was 9%. Assume a 360-day year. CHART OF ACCOUNTS Hooper Inc. General Ledger ASSETS 111 Cash 121 Accounts Receivable 125 Notes Receivable 126 Discount on Notes Receivable 127 Interest Receivable 141 Inventory 152 Prepaid Insurance 181 Equipment 198 Accumulated Depreciation LIABILITIES 211 Accounts Payable 231 Salaries Payable 250 Unearned Income 261 Income Taxes…