The franchisor charges an initial franchise fee of P110,000 broken down as follows: Right to trade name, market, know-how P 50,000 Training services 20,000 Equipment (Cost of P10,800) 40,000 Total initial franchise fee P110,000 Upon signing of the agreement, a payment of P70,000 is due. Thereafter, two annua payments of P30,000 are required. The credit rating of the franchisee is such that it would have to pay interest of 8% to borrow money. The franchise agreement is signed on August 1, 2019, and the franchise commences operation on November 1, 2019. Assuming that no future services are required by the franchisor once the franchise begins operations, the entry on August 1, 2019 would include:
The franchisor charges an initial franchise fee of P110,000 broken down as follows: Right to trade name, market, know-how P 50,000 Training services 20,000 Equipment (Cost of P10,800) 40,000 Total initial franchise fee P110,000 Upon signing of the agreement, a payment of P70,000 is due. Thereafter, two annua payments of P30,000 are required. The credit rating of the franchisee is such that it would have to pay interest of 8% to borrow money. The franchise agreement is signed on August 1, 2019, and the franchise commences operation on November 1, 2019. Assuming that no future services are required by the franchisor once the franchise begins operations, the entry on August 1, 2019 would include:
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:The franchisor charges an initial franchise fee of P110,000 broken down as follows:
Right to trade name, market, know-how P 50,000
Training services
Equipment (Cost of P10,800)
Total initial franchise fee
20,000
40,000
P110,000
Upon signing of the agreement, a payment of P70,000 is due. Thereafter, two annual
payments of P30,000 are required. The credit rating of the franchisee is such that it
would have to pay interest of 8% to borrow money. The franchise agreement is
signed on August 1, 2019, and the franchise commences operation on November 1,
2019. Assuming that no future services are required by the franchisor once the
franchise begins operations, the entry on August 1, 2019 would include:
Transcribed Image Text:The franchisor charges an initial franchise fee of P110,000 broken down as follows:
Right to trade name, market, know-how P 50,000
Training services
Equipment (Cost of P10,800)
Total initial franchise fee
20,000
40,000
P110,000
Upon signing of the agreement, a payment of P70,000 is due. Thereafter, two annual
payments of P30,000 are required. The credit rating of the franchisee is such that it
would have to pay interest of 8% to borrow money. The franchise agreement is
signed on August 1, 2019, and the franchise commences operation on November 1,
2019. Assuming that no future services are required by the franchisor once the
franchise begins operations, determine the net income reported on December 31,
2019.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 1 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education