Problem 3: MNO Corp. completed a three-month franchise contract.The terms of the contract include a P50,000 down payment and aP100,000 note receivable upon the start of the operations. MNOincurred direct costs of P40,000 and administrative costs of P20,000.The prevailing market rate of interest for similar notes is 12% butMNO deems the interest to be immaterial.BAGUIO CITYRequired:9. Gross profit from the franchise contract

Franchise Contract : Franchise is a kind of license that gives the right to use the name of the…

se cont terms of the contract include a P50,000 down payment and O,000 note receivable upon the start of the operations. MNC rred direct costs of P40,000 and administrative costs of P20, prevailing market rate of interest for similar notes is 12% bu O deems the interest to be immaterial. Required: 1911 BAGUIO CITY

se cont terms of the contract include a P50,000 down payment and O,000 note receivable upon the start of the operations. MNC rred direct costs of P40,000 and administrative costs of P20, prevailing market rate of interest for similar notes is 12% bu O deems the interest to be immaterial. Required: 1911 BAGUIO CITY

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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On January 1, 20x1, Marc Company enters into a contract with a customer to transfer a license. The initial franchise fee is P200,000, payable as follows: 20% cash down payment upon signing of the contract, and the balance is payable in four (4) equal annual installments starting December 31, 20X1. The appropriate discount rate is 10%. The contract also requires Marc Company to transfer equipment to the customer. The equipment has a cost of P30,000 and a stand-alone selling price of P50,000. The license has a stand-alone selling price of P38,000. Marc Company regularly sells the license and the equipment separately. The equipment is transferred to the customer on January 15, 20x1, while the license is transferred to the customer on February 1, 20x1. REQUIRED: Total transaction price Transaction price allocated to license Transaction price allocated to equipment Franchise fee revenue
Momong Company sells a franchise with initial franchise fee of P70,000. A downpayment of P20,000 cash is required, with the balance covered by issuance of P50,000, 10% note payable in five equal annual installments . Question: If all material services have been substantially performed, collectibility of note is reasonably assured, but the refund period has not expired, what is the journal entry to record the transaction: Group of answer choices a. Debit Cash- P20,000; Debit Notes receivable - P50,000; Credit Franchise fees - P20,000; Credit Unearned franchise fees - P50,000 b. Debit Cash - P20,000; Debit Notes receivable - P50,000; Credit Unearned franchise fees - P70,000 c. Debit Cash - P20,000; Debit Notes receivable - P50,000; Credit Franchsie fees - P50,000; Credit Unearned franchise fees - P20,000 d. Debit Cash - P20,000; Debit Notes receivable - P50,000; Credit Franchise fees - P70,000
A franchisor, charges an initial franchise fee of P920,000, with P200,000 paid when the agreement is signed and the balance in five annual payments. The present value of the future payments, discounted at 10% is P545,872. Franchise operations already started and no future services are required to be performed. The amount of revenue from franchise fees is: a. 745,872 b. 721,871
4.FOR NUMBERS 4 - 6:Brilliant Company sold a franchise to sell its products for P5,000,000 on January 1, 2021. The initial fee is payable P500,000 upon signing of the contract and the balance in 5 equal installments every December 31, evidenced by a 12% promissory note. The agreement provides that the franchisor will assist in the location of site, supervision of the building construction, project study or market survey, assistance in the acquisition of facilities, training and management of personnel, quality control, advertising and promotion. It was also agreed that the franchisee will pay a royalty fee equal to 5% of its average sales every calendar year. The franchise outlet was opened on May 1, 2021 and the average monthly sales of the franchisee is P100,000. The franchisor has incurred P1,500,000 related to the services required by the contract.1. How much is the Initial Franchise Fee Revenue to be recognized in 2021?
On January 1, 20x1, Sunbathe Co. enters into a contract with a customer to transfer a license. The initial franchise fee is P100,000 payable as follows: 20% cash down payment upon signing of the contract and the balance is payable in 4 equal annual installments starting December 31, 20x1. The appropriate discount rate is 12%. The contract states that the initial franchise fee consists of P30,000 consideration for the equipment that Sunbathe Co. will transfer to the customer and the P70,000 balance for the franchise rights. • Sunbathe Co. regularly sells the equipment and the license separately. The stand-alone selling prices are P40,000 for the equipment and P38,000 for the license. The license provides the customer the "right to use" Sunbathe's intellectual property as it exists at the point in time at which the license is granted. The equipment is transferred to the customer on January 15, 20x1, while the license is transferred to the customer on February 1, 20x1. Provide journal…
CASE 1 On January 1, 20x1, Marc Company enters into a contract with a customer to transfer a license. The initial franchise fee is P200,000, payable as follows: 20% cash down payment upon signing of the contract, and the balance is payable in four (4) equal annual installments starting December 31, 20X1. The appropriate discount rate is 10%. The contract also requires Marc Company to transfer equipment to the customer. The equipment has a cost of P30,000 and a stand-alone selling price of P50,000. The license has a stand-alone selling price of P38,000. Marc Company regularly sells the license and the equipment separately. The equipment is transferred to the customer on January 15, 20x1, while the license is transferred to the customer on February 1, 20x1. REQUIRED: Compute the following: 1. Total transaction price 2. Transaction price allocated to license 3. Transaction price allocated to equipment 4. Franchise fee revenue
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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:
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:
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Pacific Crossburgers Inc. charges an initial fee of P70,000. Upon the signing of the agreement (which covers 3 years), a payment of P28,000 is due. Thereafter, three (3) annual payments of P14,000 are required. The credit rating of the franchisee is such that it would have to pay interest at 10% to borrow money. The franchise agreement signed on May 1, 20x5, and the franchise commences operation on July 1, 20x5. Assuming that the total franchise fee includes training services (with a value of P2,400) for the period leading up to the franchise opening and for two (2) months following opening.
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