On January 1, 2021, Entity A granted a franchise to Entity B involving a food stall. The franchise agreement requires Entity B to pay nonrefundable initial franchise fee amounting to P1,000,000 within ten days from the signing of document evidencing the franchise agreement. Moreover, the franchise agreement requires Entity B to pay contingent franchise fee equivalent to 10% of its sales revenue to Entity A. Entity B paid the initial franchise fee on January 10, 2021. In relation to initial franchise fee, Entity A is required to render the following separate and distinct performance obligations: a. To construct the food stall of Entity B which has stand-alone selling price of P500,000. b. To allow Entity B to use its registered trademark and tradename for a period of 20 years starting January 1, 2021 which has stand-alone selling price of P200,000. c. To supply 5,000 units of raw materials to Entity B which has stand-alone selling price of P300,000. On June 30, 2021, Entity A completed the construction of Entity B's food stall. As of December 31, 2021, Entity has already delivered 2.000 units of raw materials to Entity B. Entity B commenced its operations

On January 1, 2021, Entity A granted a franchise to Entity B involving a food stall. The franchise agreement requires Entity B to pay nonrefundable initial franchise fee amounting to P1,000,000 within ten days from the signing of document evidencing the franchise agreement. Moreover, the franchise agreement requires Entity B to pay contingent franchise fee equivalent to 10% of its sales revenue to Entity A. Entity B paid the initial franchise fee on January 10, 2021. In relation to initial franchise fee, Entity A is required to render the following separate and distinct performance obligations: a. To construct the food stall of Entity B which has stand-alone selling price of P500,000. b. To allow Entity B to use its registered trademark and tradename for a period of 20 years starting January 1, 2021 which has stand-alone selling price of P200,000. c. To supply 5,000 units of raw materials to Entity B which has stand-alone selling price of P300,000. On June 30, 2021, Entity A completed the construction of Entity B's food stall. As of December 31, 2021, Entity has already delivered 2.000 units of raw materials to Entity B. Entity B commenced its operations

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

On July 1, 2019, HOSPITAL CORP. signed an agreement to operate as a franchise of PLAYLIST CO. for an initial franchise fee of P1,200,000. On the same date, Hospital paid P400,000 and agreed to pay the balance in four equal payments of P200,000 beginning July 1, 2020. The down payment is not refundable, and no future services are required of the franchisor. Hospital can borrow at 14% for a loan of this type. If the franchise has definite life of 20 years, what is the carrying value of the franchise to be reported on the December 31, 2021 balance sheet? (Round off the PV factor to 4 decimal places and the final answer to the nearest peso)
On March 01, 2021, WX entered into a franchise contract with YZ. The franchise agreement required the franchisee, YZ, to pay a nonrefundable upfront fee in the amount of P1,440,000 and on-going payment of royalties equivalent to 5% of the sales of the franchisee. YZ paid the non-refundable upfront fee on March 01, 2021. In relation to the nonrefundable upfront fee, the franchise agreement required WX to render the following performance obligations: To construct the franchisee's stall with stand-alone selling price of P300,000. To supply cooking equipment and cash registers. Price of competitors for the similar items (cooking equipment and cash registers) is valued at P240,000 while the forecast of the expected cost of AshLloyd for the performance obligation is P200,000 plus an appropriate margin above cost of 25%. To deliver 10,000 units of raw materials to YZ with stand-alone selling price of P460,000. To allow YZ to use the entity's tradename for a period of 10 years starting…
On Jan. 2, 2016, Gino Services Inc. signed an agreement authoring Triple 8 Company to operate as a franchisee over a 20-year period for an initial franchise fee of 50,000 received when the agreement was signed. Triple 8 commenced operations on July 1, 2016, at which date all of the initial services required of Gino had been performed. The agreement also provides that Triple 8 must pay annually to Gino a continuing franchise fee equal to 5% of their gross sales. Triple 8 reported gross sales of 400,000 for 2016. For the year ended Dec. 31, 2016, how much should Gino record as revenue from franchise fees with respect to the triple 8 franchise? a. P70,000 b. P50,000c. P45,000 d. P22,500
Cinnamon Company operates a customer loyalty program. The entity grants loyalty points for goods purchased. The loyalty points can be used by the customers in exchange for goods of the entity. The points have no expiry date. During 2019, the entity issued 150,000 award credits and expects that 80% of these award credits shall be redeemed. The total stand-alone selling price of the award credits granted is measured reliably at P3,000,000. In 2019, the entity sold goods to customers for a total consideration of P12,000,0000 based on a standalone selling price. The award credits redeemed and the total award credits expected to be redeemed each year are as follows: Redeemed Expected to be redeemed 2019 45,000 80% 2020 22,500 90% What is the revenue from points for 2019? What is the revenue from points for 2020?
Each of ABC's 12 new franchisee contracted to pay an initial franchise fee of P50,000. By December 31,2021, each franchisee had paid a non-refundable P5,000 fee and signed a note to pay P20,000 principal plus interest rate of 10% on December 31, 2022 and December 31, 2023. Experience indicates that three franchises will default on the additional payments. Service for the initial franchise fee will be performed in 2022. What amount of franchise revenue would ABC recognize on December 31, 2021?
ABC sells franchise arrangement throughout La Trinidad and Itogon. Under a franchise agreement, ABC receives 1,000,000 in exchange for satisfying the following separate performance obligations: franchisees have a ten- year right to operate as an ABC retail establishment once it started its operation; franchisees receive an ABC building and necessary equipment; franchisees receive initial training and certification as an ABC retail. The 1,000,000 is payable with a down payment of P500,000 on August 1, 2021 with the balance will be payable in five equal annual payments with an interest of 10% starting January 1, 2022. The stand-alone selling price of the initial training and certification is P100,000 and P400,000 for the building and equipment. ABC estimates that the stand-alone selling price of the ten-year right to operate as a franchise using the residual approach. ABC received P500,000 on August 1, 2021 from DDD, which represent the collection from the training, building and…
Dominador's Pizza Inc. enters into a franchise agreement on December 31, 20x7 giving Doming Corp. the right to operate as a franchisee of Dominador's Pizza for 5 years. Dominador's charges Doming an initial franchise fee of P475,000 for the right to operate as a franchisee. Of this amount, P190,000 is payable when Doming Corp. signs the agreement, and the balance is payable in five annual payments of P57,000 each on December 31 Consider the following for allocation of the transaction price at December 31, 20x7. Rights to the trade name, market area, technical and proprietary know-how……………………………….…......P190,000.00 Services-training, etc………………………………………...94,591.50 Machinery and equipment, etc. (costing, P95,000)……..133,000.00 Total transaction price…………………………………….. P417,591.50 The credit rating of Doming indicates that money can be borrowed at 8%. The present value of an ordinary annuity of five annual receipts of P57,000 each discounted at 8% is P227,591.50. The discount of…
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:
Collins, Inc., entered into a 10-year franchise agreement with an individual. For an initial franchise fee of$40,000, Collins agrees to assist in design and construction of the franchise location and in all other necessarystart-up activities. Also, in exchange for advertising and promotional services, the franchisee agrees to pay continuing franchise fees equal to 5% of revenue generated by the franchise. When should Collins recognize revenuefor the initial and continuing franchise fees?