The franchise revenue on December 31,20x7 should be: a. None b. P195,000 c. P 975,000 d. P1,160,250 14. The franchise revenue on December 31, 20x8 should be:
The franchise revenue on December 31,20x7 should be: a. None b. P195,000 c. P 975,000 d. P1,160,250 14. The franchise revenue on December 31, 20x8 should be:
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Xaviery Computers is a franchisor and provides a range of computing services hardware/software installation,
repairs, data backup, device syncing, and network solutions) on popular Samsung, Dell, Acer, and other PC
devices. Each franchise agreement gives a franchisee the right to open a Xaviery outlet and sell Xavierys'
products and services in the area for five (5) years. Under the contract, Xaviery also provides the franchisee with
a number of services to support and enhance the franchise brand, including:
-advising and consulting on the operations of the store;
-communicating new hardware and software developments, and service techniques;
-providing business and training manuals; and
-advertising programs and training.
As an almost entirely service operation (all materials and other supplies are purchased as needed by customers),
Xaviery provides few upfront services to franchisees. Instead, the franchisee recruits service technicians, who
are given Xavierys' training materials (online manuals and tutorials), which are updated for technology changes,
on a monthly basis at a minimum.
Xaviery enters into a franchise agreement on December 15, 20x7, giving a franchisee the rights to operate a
Xaviery franchise in Cagayan Valley for five (5) years. Xaviery charges an initial franchise fee of P975,000 for
the right to operate as a franchisee, payable upon signing the contract. Xaviery also receives ongoing
royalty payments of 7% of the franchisee's annual sales (payable each January 11 of the following year).
13. The franchise revenue on December 31,20x7 should be:
a. None
b. P195,000
c. P 975,000
d. P1,160,250
14. The franchise revenue on December 31, 20x8 should be:
a. P 195,000
b. P975,000
c. P1,160,250
d. P1,355,250
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