On December 31, 2021, RAP, Inc. authorized JIN to operate as a franchisee for an initial franchise fee of P150,000. Of this amount, P60,000 was received upon signing the agreement, and the balance, represented by a note, is due in three annual payments of P30,000 each, beginning December 31, 2022. The present value on December 31, 2021 of the three annual payments appropriately discounted is P72,000. According to the agreement, the nonrefundable down payment represents a fair measure of the services already performed by RAP, however, substantial future services are required of RAP. Collectability of the note is reasonably certain. On December 31, 2021, RAP should record unearned franchise fees in respect of the JIN franchise of A. 150,000 C. 72,000 B. 90,000 D. -0-
Problem 1
On December 31, 2021, RAP, Inc. authorized JIN to operate as a franchisee
for an initial franchise fee of P150,000. Of this amount, P60,000 was
received upon signing the agreement, and the balance, represented by a
note, is due in three annual payments of P30,000 each, beginning December
31, 2022. The present value on December 31, 2021 of the three annual
payments appropriately discounted is P72,000. According to the
agreement, the nonrefundable down payment represents a fair measure of
the services already performed by RAP, however, substantial future services
are required of RAP. Collectability of the note is reasonably certain.
On December 31, 2021, RAP should record unearned franchise fees in respect
of the JIN franchise of
A. 150,000 C. 72,000
B. 90,000 D. -0-
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