On January 3, 2008, PP Services, Inc. signed an agreement authorizing CC Company to operate as a franchisee over a 20-year period for an initial franchise fee of P 50,000 received when the agreement was signed. CC commenced operations on July 1, 2008, at which date all of the initial services required of PP had been performed. The agreement also provides that CC must pay annually to PP a continuing franchise fee equal to 5% of the revenue from the franchise. CC’s franchise revenue for 2008 was P 400,000. For the year ended December 31, 2008, how much should PP record as revenue from franchise fees in respect of the CC’s franchise?P 70,000P 50,000P 45,000P 22,500

Since we have received 50000 as initial franchise fees for 20 years then this 50000 is apportioned…

Answered: On January 3, 2008, PP Services, Inc.…

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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On January 3, 2008, PP Services, Inc. signed an agreement authorizing CC Company to operate as a franchisee over a 20-year period for an initial franchise fee of P 50,000 received when the agreement was signed. CC commenced operations on July 1, 2008, at which date all of the initial services required of PP had been performed. The agreement also provides that CC must pay annually to PP a continuing franchise fee equal to 5% of the revenue from the franchise. CC’s franchise revenue for 2008 was P 400,000. For the year ended December 31, 2008, how much should PP record as revenue from franchise fees in respect of the CC’s franchise?
1. P 70,000
2. P 50,000
3. P 45,000
4. P 22,500

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