A 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?

A 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?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter17: Advanced Issues In Revenue Recognition

Section: Chapter Questions

Problem 6C: On October 1, 2019, Grahams WeedFeed Inc. signs a contract to maintain the grounds for BigData Corp....

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On January 1, 2019, Mopps Corp. agrees to provide Conklin Company 3 years of cleaning and janitorial services. The contract sets the price at 12,000 per year, which is the normal standalone price that Mopps charges. On December 31, 2020, Mopps and Conklin agree to modify the contract. Mopps reduces the fee for the third year to 10,000, and Conklin agrees to a 4-year extension that will extend services through December 31, 2024, at a price of 15,000 per year. At the time that the contract is modified, Mopps is charging other customers 13,500 for the cleaning and janitorial service. Required: Should Mopps and Conklin treat the modification as a separate contract? If so how should Mopps account for the contract modification on December 31, 2020? Support your opinion by discussing the application to this case of the factors that need to be considered for determining the accounting for contract modifications.
On October 1, 2019, Grahams WeedFeed Inc. signs a contract to maintain the grounds for BigData Corp. The contract ends on March 31, 2020, and has a monthly payment of 3,200. The contract does not include any stipulations for additional periods. On June 1, Grahams WeedFeed and BigData sign a new 12-month contract that is retroactive to April 1, 2020. The monthly fee for the new contract is 4,000 per month and is also retroactive to April 1, 2020. During April and May of 2020, while the new contract was being negotiated, Grahams Weed Feed continued to maintain the grounds, and BigData continued to pay 3,200 per month. BigData was satisfied with Grahams WeedFeeds performance, and the only issue during negotiations was the monthly fee. Required: Determine if a valid contract exists between Grahams WeedFeed and BigData during April and May 2020.
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