Please provide a solution in good accounting form. What is the unearned franchise revenue?a. 879 080b. 512 500 ABC sells franchise arrangement throughout La Trinidad and Itogon. Under a franchise agreement, ABC receives1,000,000 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 ABCbuilding and necessary equipment; franchisees receive initial training and certification as an ABC retail. The1,000,000 is payable with a down payment of P500,000 on August 1, 2021 with the balance will be payable infive equal annual payments with an interest of 10% starting January 1, 2022. The stand-alone selling price ofthe initial training and certification is P100,000 and P400,000 for the building and equipment. ABC estimatesthat 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, buildingand equipment, and accepted a note receivable for the rest of the franchise price. ABC will construct and equipDDD's building and train and certify DDD by November 1, 2021 and DDD's ten-year right to operate as ABCfranchise will commence on November 1, 2021. Compute the unearned franchise revenue to be recognize inthe year ended December 31, 2021.

Given: To compute the unearned franchise revenue as,

Answered: starting January 1, 2022. The P400,000…

Business

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starting January 1, 2022. The P400,000 for the building anc ght to operate as a franchise u

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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Question

Please provide a solution in good accounting form.

What is the unearned franchise revenue?

a. 879 080

b. 512 500

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 equipment, and accepted a note receivable for the rest of the franchise price. ABC will construct and equip
DDD's building and train and certify DDD by November 1, 2021 and DDD's ten-year right to operate as ABC
franchise will commence on November 1, 2021. Compute the unearned franchise revenue to be recognize in
the year ended December 31, 2021.

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