Dominador's Pizza Inc. enters into a franchise agreement on December 31, 20x7 giving Doming Corp. the right to operate as a franchisee of Dominador's Pizza for 5 years. Dominador's charges Doming an initial franchise fee of P475,000 for the right to operate as a franchisee. Of this amount, P190,000 is payable when Doming Corp. signs the agreement, and the balance is payable in five annual payments of P57,000 each on December 31 Consider the following for allocation of the transaction price at December 31, 20x7. Rights to the trade name, market area, technical and proprietary know-how……………………………….…......P190,000.00 Services-training,e tc………………………………………...94,591.50 Machinery and equipments, etc. (costing, P95,000)……..133,000.00 Total transaction price…………………………………….. P417,591.50 The credit rating of Doming indicates that money can be borrowed at 8%. The present value of an ordinary annuity of five annual receipts of P57,000 each discounted at 8% is P227,591.50. The discount of P57,408.50 represents the interest revenue to be accrued by Dominador 's Pizza Inc. over the payment period. Training is completed in January 20x8, the equipment is installed in January 20x8, and Doming holds a grand opening on February 4, 20x8. On February 4, 20x8, franchise opens. Doming also promises to pay ongoing royalty payments of 1% of its annual sales products from Dominador's at its current stand-alone selling prices at the time of purchase. (payable every January 31 of the following year) and is obliged to purchase 8. How much revenue (franchise revenue, service revenue and sales revenue -machinery and equipments) be recognized on December 31, 20x7? show computation a. Zero. b. P 94,591.50 c. P133,000.00 d. P190,000.00 9. How much revenue (franchise revenue, service revenue and sales revenue-machinery and equipment) be recognized on February 4, 20x83? show compputation a. P 94,591.50 b. P133,000.00 c. P190,000.00 d. P417,591.50 How much continuing franchise revenue be recognized on December 31 20x8, assuming the sales of P4,987,500 was generated for the first year of operations? a. Zero. b. P48,875.00 c. P190,000.00 d. P417,591.50

Dominador's Pizza Inc. enters into a franchise agreement on December 31, 20x7 giving Doming Corp. the right to operate as a franchisee of Dominador's Pizza for 5 years. Dominador's charges Doming an initial franchise fee of P475,000 for the right to operate as a franchisee. Of this amount, P190,000 is payable when Doming Corp. signs the agreement, and the balance is payable in five annual payments of P57,000 each on December 31 Consider the following for allocation of the transaction price at December 31, 20x7. Rights to the trade name, market area, technical and proprietary know-how……………………………….…......P190,000.00 Services-training,e tc………………………………………...94,591.50 Machinery and equipments, etc. (costing, P95,000)……..133,000.00 Total transaction price…………………………………….. P417,591.50 The credit rating of Doming indicates that money can be borrowed at 8%. The present value of an ordinary annuity of five annual receipts of P57,000 each discounted at 8% is P227,591.50. The discount of P57,408.50 represents the interest revenue to be accrued by Dominador 's Pizza Inc. over the payment period. Training is completed in January 20x8, the equipment is installed in January 20x8, and Doming holds a grand opening on February 4, 20x8. On February 4, 20x8, franchise opens. Doming also promises to pay ongoing royalty payments of 1% of its annual sales products from Dominador's at its current stand-alone selling prices at the time of purchase. (payable every January 31 of the following year) and is obliged to purchase 8. How much revenue (franchise revenue, service revenue and sales revenue -machinery and equipments) be recognized on December 31, 20x7? show computation a. Zero. b. P 94,591.50 c. P133,000.00 d. P190,000.00 9. How much revenue (franchise revenue, service revenue and sales revenue-machinery and equipment) be recognized on February 4, 20x83? show compputation a. P 94,591.50 b. P133,000.00 c. P190,000.00 d. P417,591.50 How much continuing franchise revenue be recognized on December 31 20x8, assuming the sales of P4,987,500 was generated for the first year of operations? a. Zero. b. P48,875.00 c. P190,000.00 d. P417,591.50

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 7C: On January 1, 2019, Mopps Corp. agrees to provide Conklin Company 3 years of cleaning and janitorial...

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Question

Dominador's Pizza Inc. enters into a franchise agreement on December 31, 20x7

giving Doming Corp. the right to operate as a franchisee of Dominador's Pizza

for 5 years. Dominador's charges Doming an initial franchise fee of P475,000 for

the right to operate as a franchisee. Of this amount, P190,000 is payable when

Doming Corp. signs the agreement, and the balance is payable in five annual

payments of P57,000 each on December 31

Consider the following for allocation of the transaction price at December 31,

20x7.

Rights to the trade name, market area, technical and

proprietary know-how……………………………….…......P190,000.00

Services-training,e tc………………………………………...94,591.50

Machinery and equipments, etc. (costing, P95,000)……..133,000.00

Total transaction price…………………………………….. P417,591.50

The credit rating of Doming indicates that money can be borrowed at 8%. The present value of an ordinary

annuity of five annual receipts of P57,000 each discounted at 8% is P227,591.50. The discount of P57,408.50

represents the interest revenue to be accrued by Dominador 's Pizza Inc. over the payment period.

Training is completed in January 20x8, the equipment is installed in January 20x8, and Doming holds a grand

opening on February 4, 20x8. On February 4, 20x8, franchise opens.

Doming also promises to pay ongoing royalty payments of 1% of its annual sales products from Dominador's at

its current stand-alone selling prices at the time of purchase. (payable every January 31 of the following year)

and is obliged to purchase

8. How much revenue (franchise revenue, service revenue and sales revenue -machinery and equipments) be

recognized on December 31, 20x7? show computation

a. Zero.

b. P 94,591.50

c. P133,000.00

d. P190,000.00

9. How much revenue (franchise revenue, service revenue and sales revenue-machinery and equipment) be

recognized on February 4, 20x83? show compputation

a. P 94,591.50

b. P133,000.00

c. P190,000.00

d. P417,591.50

How much continuing franchise revenue be recognized on December 31

20x8, assuming the sales of P4,987,500 was generated for the first year of

operations?

a. Zero.

b. P48,875.00

c. P190,000.00

d. P417,591.50

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