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- Problem 1On December 31, 2021, RAP, Inc. authorized JIN to operate as a franchiseefor an initial franchise fee of P150,000. Of this amount, P60,000 wasreceived upon signing the agreement, and the balance, represented by anote, is due in three annual payments of P30,000 each, beginning December31, 2022. The present value on December 31, 2021 of the three annualpayments appropriately discounted is P72,000. According to theagreement, the nonrefundable down payment represents a fair measure ofthe services already performed by RAP, however, substantial future servicesare required of RAP. Collectability of the note is reasonably certain.On December 31, 2021, RAP should record unearned franchise fees in respectof the JIN franchise ofA. 150,000 C. 72,000B. 90,000 D. -0-date of signing PROBLEM 7-6 Bin Tai Fung entered into a franchise agreement with CAFamilia on January 1, 2019. The initial franchise fee is P9,500,000 of which P1,500,000 is payable upon signing the contract and the balance is covered by a non-interest bearing note payable in four equal annual instalments starting Dec. 31, 2019. The down payment is non-refundable. The contract also includes a 5% royalty fee based on average sales for the year. CAFamilia estimated that they can borrow at the rate of 7% (round off PV factor to 2 decimal places). The franchisee commenced its operations on June 30, 2019. For the year 2019, CAFamilia reported average monthly sales of P80,000. The collectability of the note is reasonably certain. Required. Give all the entries required to record the transactions from the date of signing the contract to December 31, 2019.On January 1, 20x1, Marc Company enters into a contract with a customer to transfer a license. The initial franchise fee is P200,000, payable as follows: 20% cash down payment upon signing of the contract, and the balance is payable in four (4) equal annual installments starting December 31, 20X1. The appropriate discount rate is 10%. The contract also requires Marc Company to transfer equipment to the customer. The equipment has a cost of P30,000 and a stand-alone selling price of P50,000. The license has a stand-alone selling price of P38,000. Marc Company regularly sells the license and the equipment separately. The equipment is transferred to the customer on January 15, 20x1, while the license is transferred to the customer on February 1, 20x1. REQUIRED: Compute the following: 1. Total transaction price 2. Transaction price allocated to license 3. Transaction price allocated to equipment 4. Franchise fee revenue
- On January 1, 20x1, Marc Company enters into a contract with a customer to transfer a license. The initial franchise fee is P200,000, payable as follows: 20% cash down payment upon signing of the contract, and the balance is payable in four (4) equal annual installments starting December 31, 20X1. The appropriate discount rate is 10%. The contract also requires Marc Company to transfer equipment to the customer. The equipment has a cost of P30,000 and a stand-alone selling price of P50,000. The license has a stand-alone selling price of P38,000. Marc Company regularly sells the license and the equipment separately. The equipment is transferred to the customer on January 15, 20x1, while the license is transferred to the customer on February 1, 20x1. REQUIRED: Total transaction price Transaction price allocated to license Transaction price allocated to equipment Franchise fee revenueXIV. Allocating the Transaction Price Ging Systems sold software to a customer for P80,000. As part of the contract, Ging provide "free" technical support over the next six months. Ging sells the same sodware w technical support for P70,000 and a stand-alone six-month technical support cont P30.000, so these products would sell for P100,000 it sold separately. Required: 1. Indicate the transaction price for each of these transactions and when revenue wi recognized. 2. Prepare Ging's journal entry to record the sale of the software.8 On 1 January 20X8, an entity enters into a contract to transfer Products A and B to a customer in exchange for P1,000. The contract requires Product A to be delivered first and states that payment for the delivery of Product A is conditional on the delivery of Product B. The stand-alone selling prices of Products A and B are P480 and P720, respectively. Product A is delivered on January 3, 20X8 while Product B is delivered on March 31, 20X8. The customer pays on April 8, 20X8. Requirement: Provide the journal entries. 9. Use the facts in the immediately preceding problem. In addition, the contract also includes a promise to transfer Product D. Total consideration in the contract is P130. The stand-alone selling price for Product D is highly variable because the entity sells Product D to different customers for a broad range of amounts (P15 - P45). Requirement: Allocate the transaction price to the performance obligations in the contract.
- Exercise 6-8 (Algo) Performance obligations; customer option for additional goods or services [LO6-4, 6- 5] On May 1, 2021, Meta Computer, Inc., enters into a contract to sell 5,500 units of Comfort Office Keyboard to one of its clients, Bionics, Inc., at a fixed price of $94,600, to be settled by a cash payment on May 1. Delivery is scheduled for June 1, 2021. As part of the contract, the seller offers a 25% discount coupon to Bionics for any purchases in the next six months. The seller will continue to offer a 5% discount on all sales during the same time period, which will be available to all customers. Based on experience, Meta Computer estimates a 50% probability that Bionics will redeem the 25% discount voucher, and that the coupon will be applied to $44,000 of purchases. The stand-alone selling price for the Comfort Office Keyboard is $19.20 per unit. Required: 1. How many performance obligations are in this contract? 2. Prepare the journal entry that Meta would record on May 1,…Exercise 6-8 (Algo) Performance obligations; customer option for additional goods or services [LO6-4, 6- 5] On May 1, 2021, Meta Computer, Inc., enters into a contract to sell 4,500 units of Comfort Office Keyboard to one of its clients, Bionics, Inc., at a fixed price of $76,500, to be settled by a cash payment on May 1. Delivery is scheduled for June 1, 2021. As part of the contract, the seller offers a 25% discount coupon to Bionics for any purchases in the next six months. The seller will continue to offer a 5% discount on all sales during the same time period, which will be available to all customers. Based on experience, Meta Computer estimates a 50% probability that Bionics will redeem the 25% discount voucher, and that the coupon will be applied to $45,000 of purchases. The stand-alone selling price for the Comfort Office Keyboard is $19.00 per unit. Required: 1. How many performance obligations are in this contract? 2. Prepare the journal entry that Meta would record on May 1,…ABC Company sells franchise arrangements throughout Luzon and Visayas. Under a franchise agreement, ABC receives P600,000 in exchange for satisfying the following separate performance obligations: Franchisees have a five-year right to operate as an ABC's retail establishment in an exclusive sales territory Franchisees receive initial training and certification, and . Franchisees receive an ABC building and necessary equipment. ● The stand-alone selling price of the initial training and certification is P15,000, and P450,000 for the building and equipment. ABC estimates the stand-alone selling price of the five-year right to operate as an ABC establishment using the residual approach. ABC received P75,000 on July 1, 2022, from a customer and accepted a note receivable for the rest of the franchise price. ABC will construct and equip the customer's building and train and certify the customer by September 1, and the customer's five-year right to operate as an ABC establishment will…
- On January 1, 20x1, Sunbathe Co. enters into a contract with a customer to transfer a license. The initial franchise fee is P100,000 payable as follows: 20% cash down payment upon signing of the contract and the balance is payable in 4 equal annual installments starting December 31, 20x1. The appropriate discount rate is 12%. The contract states that the initial franchise fee consists of P30,000 consideration for the equipment that Sunbathe Co. will transfer to the customer and the P70,000 balance for the franchise rights. • Sunbathe Co. regularly sells the equipment and the license separately. The stand-alone selling prices are P40,000 for the equipment and P38,000 for the license. The license provides the customer the "right to use" Sunbathe's intellectual property as it exists at the point in time at which the license is granted. The equipment is transferred to the customer on January 15, 20x1, while the license is transferred to the customer on February 1, 20x1. Provide journal…15. On Jan. 1, 20x1, Hurt Co. entered into a franchise agreement with Hero Co. The franchise contract gives Hero Co. the right to use Hurt's trademark and proprietary processes for a period of 4 years. The franchise requires payment of an upfront fee of P1,000,000, payable at contract inception, and 5% monthly royalty based on sales. Aside from the granting of the license, the franchise agreement also requires Hurt Co. to undertake pre-opening activities to setup the contract and post- commencement activities, such as research and development and marketing campaigns, to support the intellectual property. Although the activities do not result in the direct transfer of a good or service to Hero Co. as the activities occur, it is expected that Hero Co. will benefit from them. All the necessary preparations were completed and Hero Co. started business operations on January 31, 20x1. Hero had total sales of P9,000,000 in 20x1. How much revenue would Hurt Co, recognize in 20x1? a. 1,450,000…A On January 1. 2020. Machinery Corp. enters into a contract with a customer for the sale of a machine and related one year maintenance services for a total contract price of P2000.000. Machinery Corp. regularly sells these items separately. If they were to be purchased separately, their stand-alone selling prices are as follows: P1.800.000 for the machines and P600.000 for the one-year maintenance services Machinery Corp transfers the machine, and collects the total contract price on February 1, 2020 The maintenance services start on that date. Required Analyze the five steps of model of revenue recognition