Franchise arrangement and performance obligation In a franchise transaction, the franchisor has multiple performance obligations. In franchise business, the franchisor gives the selling rights to the franchisee for a particular period. The franchisor provides the start-up services to the franchisee. Therefore, the franchise involves a license to use the franchisor property and sales of the goods and service in the name of franchisor. The revenue recognition principle The revenue recognition principle refers to the revenue that should be recognized in the time period, when the performance obligation (sales or services) is completed by the company. To discuss: The timing of revenue recognition of initial franchise fees revenue.
Franchise arrangement and performance obligation In a franchise transaction, the franchisor has multiple performance obligations. In franchise business, the franchisor gives the selling rights to the franchisee for a particular period. The franchisor provides the start-up services to the franchisee. Therefore, the franchise involves a license to use the franchisor property and sales of the goods and service in the name of franchisor. The revenue recognition principle The revenue recognition principle refers to the revenue that should be recognized in the time period, when the performance obligation (sales or services) is completed by the company. To discuss: The timing of revenue recognition of initial franchise fees revenue.
Solution Summary: The author explains the franchisor's multiple performance obligations in a franchise transaction. The revenue recognition principle refers to the revenue that should be recognized in the time period, when the performance obligation is completed.
In a franchise transaction, the franchisor has multiple performance obligations. In franchise business, the franchisor gives the selling rights to the franchisee for a particular period. The franchisor provides the start-up services to the franchisee.
Therefore, the franchise involves a license to use the franchisor property and sales of the goods and service in the name of franchisor.
The revenue recognition principle
The revenue recognition principle refers to the revenue that should be recognized in the time period, when the performance obligation (sales or services) is completed by the company.
To discuss: The timing of revenue recognition of initial franchise fees revenue.
b)
To determine
To discuss: The manner in which the continuing fees is determined.
Assume that none of the fixed overhead can be avoided. However, if the robots are purchased from Tienh Inc., Crane can use the
released productive resources to generate additional income of $375,000. (Enter negative amounts using either a negative sign
preceding the number e.g. -45 or parentheses e.g. (45).)
Direct materials
Direct labor
Variable overhead
1A
Fixed overhead
Opportunity cost
Purchase price
Totals
Make
A
Buy
$
SA
Net Income
Increase
(Decrease)
$
Based on the above assumptions, indicate whether the offer should be accepted or rejected?
The offer
The following is a list of balances relating to Phiri Properties Ltd during 2024.
The company maintains a memorandum debtors and creditors ledger in which the individual account of customers and suppliers are maintained.
These were as follows:
Debit balance in debtors account 01/01/2024
66,300
Credit balance in creditors account 01/01/2024
50,600
Sunday credit balance on debtors ledger
Goods purchased on credit
724
257,919
Goods sold on credit
Cash received from debtors
Cash paid to suppliers
Discount received
Discount allowed
Cash purchases
Cash sales
Bad Debts written off
Interest on overdue account of customers
323,614
299,149
210,522
2,663
2,930
3,627
5,922
3,651
277
Returns outwards 2,926
Return inwards 2,805
Accounts settled by contra between debtors and creditors ledgers 1,106
Credit balances in debtors ledgers 31/12/2024. 815
Debit balances in creditors ledger 31/12/2024.698
Required:
Prepare the debtors control account as at 31/12/2024.
Prepare the creditors control account…