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- 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…On December 31, 2018, Turks Company signed an agreement to operate as franchisee of Wendy's for a franchise fee of P80,000. Of this amount, P30,000 was paid upon signing of the agreement and the balance is payable in five annual payments of P10,000 each beginning December 31, 2019. The present value of the five payment, at an appropriate rate of interest, is P56,000 at December 31, 2018. The agreement provides that the down payment is not refundable and no future services are required of the franchisor. The collection of note receivable is reasonably certain. Wendy's Company should report unearned revenue from franchise fee in its December 31, 2019 balance sheet at: Select the correct response: P80,000 P66,000 P30,000A Franchisor entered into a franchise agreement with B, franchisee, on March 31, 2021. The total franchise fee is P500,000, of which P100,000 is payable upon signing and the balance in four equal annual installments. The down payment is refundable in the event the franchisor fails to render services and none thus far had been rendered. When B's prepares its financial statements on March 31, 2021, the franchise fee revenue to be reported is?
- On January 1, 2018, an entity granted a franchise to a franchisee. The franchise agreement required the franchisee to pay a nonrefundable upfront fee in the amount of P800,000 and on-going payment of royalties equivalent to 5% of the sales of the franchisee. The franchisee paid the nonrefundable upfront fee on January 1, 2018. In relation to the nonrefundable upfront fee, the franchise agreement required the entity to render the following performance obligations: · To construct the franchisee’s stall with stand-alone selling price of P400,000. · To deliver 20,000 units of raw materials to the franchisee with stand-alone selling price of P500,000. · To allow the franchisee to use the entity tradename for a period of 10 years starting January 1, 2018 with stand-alone selling price of P100,000. On June 30, 2018, the entity completed the construction of the franchisee’s stall. On December 31, 2018, the entity was able to deliver 6,000 units of raw…On January 1, 2022, ABC Company granted a franchise to a franchisee. The franchise agreement required the franchisee to pay a nonrefundable upfront fee in the amount of P600,000 under the following payment scheme: January 1, 2022 P100,000 January 1, 2023 300,000 January 1, 2024 150,000 January 1, 2025 25,000 January 1, 2026 25,000 The franchise agreement also provides that interest of 2% per annum will be paid every January 1 based on the unpaid balance. The effective interest rate is 2.5%. Under the franchise agreement, the franchisor is required to do the following: Construct the franchisee’s stall with a stand-alone price of P400,000. Deliver equipment and supplies to the franchisee with a stand-alone price of P150,000. Allow the franchisee to use the tradename for a period of five years starting in 2022 with a stand-alone price of P250,000. ABC Company considers each of the following items above as a distinct performance obligation that is…Pizza Pie Inc. entered into a franchise agreement on December 31, 2029, giving Freshly Bake Corp. the right to operate as a franchise of Pizza Pie for 5 years. Pizza Pie charged Freshly Bake an initial franchise fee of P50,000 for the right to operate as a franchisee. Of this amount P20,000 is payable when the food fight signs the agreement, and the note balance is payable in five annual payments of P6,000 each starting on December 31, 2020, as part of the arrangement. Pizza helps locate the site, negotiate the lease or purchase of the site, supervise the construction activity, and provide employee training and the equipment necessary to be a distributor of its products. Similar training services and equipment are sold separately. Freshly Bake also promises to pay ongoing royalty payments of 1% of its annual sales (payable each Jan. 31 of the following year) and is obliged to purchase products from pizza at its current stand-alone selling price at the same time of purchase. The credit…
- 1. On December 31, 2020, Rice, Inc. authorized Graft to operate as a franchisee for an initial franchise fee of P150,000. Of this amount, P60,000 was received upon signing of the agreement and the balance, represented by a note, is due in three annual payments of P30,000 each beginning December 31, 2021. The present value on December 31,2020 of the three annual payments appropriately discounted is P72,000. According to the agreement, the non- refundable down payment represents a fair measure of the services already performed by Rice; however, substantial future services are required of Rice. Collectability of the note is reasonably certain. a. in Rice’s December 31, 2020 balance sheet, unearned franchise fees from Graft’s franchise should be reported as?1. On December 31, 2020, Rice, Inc. authorized Graft to operate as a franchisee for an initial franchise fee of P150,000. Of this amount, P60,000 was received upon signing of the agreement and the balance, represented by a note, is due in three annual payments of P30,000 each beginning December 31, 2021. The present value on December 31,2020 of the three annual payments appropriately discounted is P72,000. According to the agreement, the non-refundable down payment represents a fair measure of the services already performed by Rice; however, substantial future services are required of Rice. Collectability of the note is reasonably certain. a. in Rice’s December 31, 2020 balance sheet, unearned franchise fees from Graft’s franchise should be reported as? 2. Levi and Zeke agreed on a joint venture to purchase and sell car accessories. Their contract stipulates that the participants shall contribute P25,000 each to be used in purchasing the merchandise, share equally in any gain or…On June 1, 2020, Chesnaught entered into a franchise agreement with Quilladin Inc. to sell their products. The agreement provides for an initial franchise fee of P3,000,000 which is payable as follows: P1,000,000 cash to be paid upon signing the contract, and the balance in four equal annual installments every December 31, starting in 2020, Chesnaught signs a non-interest bearing note for the balance. The credit, rating of the franchisee indicates that the money can be borrowed at 10%. The present value factor of an ordinary annuity at 10% for 4 periods is 3.1698. The agreement further provides that the franchisee must pay a continuing franchise fee equal to 5% of its monthly gross sales over the six years licensing period. Quilladin incurred direct cost of P930,564 and indirect costs of P167,400. The franchisee started business operations on July 1, 2020 and was able to generate sales of P1,240,000 for 2020. The first installment payment was made in due date. Assuming that the…
- On December 31, 2018, SG signed an agreement authorizing Asher Company to operate as a franchisee for an initial franchise fee of P750,000. Of this amount, P250,000 nonrefundable down payment was paid upon signing of the agreement and the balance is payable in four equal annual payment beginning December 31, 2018. The nonrefundable down payment represents a fair measure of the services already performed by SG however, substantial future services are required of SG. Asher’s credit rating is such that collection of the note is reasonably certain and that the money can be borrowed at 12%. On December 31, 2018, earned franchise fees should be reported as: (Round off present value factor to 2 decimal places.)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 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 the…