Tam's Pizza, Inc. charges an initial franchise fee of P50,000 for the right to operate as a franchisee of Tam's Pizza for five years. Of this amount, P10,000is payable when the agreement was signed and the balance in five annual payments of P8,000 each. Tam's is expected to provide continuing services tothe franchise during the contract period. The credit rating of the franchisee indicates that money can be borrowed at 8%. The present value of an ordinaryannuity of five receipts of P8,000 each discounted at 8% is P31,942.On February 1, 2020, Tam's signed a franchise agreement with Tim's. The agreement further provides that Tam's is entitled to a 3% sales-based royalty.On December 31 , 2020, Tim's reported sales of P628,000. For the year ended December 31, 2020, Tam's records total franchise revenue in an amount of

Revenue to be recognised is equal to = initial amount on signing of contract + yearly revenue +…

Answered: or the year ended December 31, 2020,…

Business

Accounting

or the year ended December 31, 2020, Tam's records total franchise revenue in an amount of

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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9
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