CASE 1 On January 1, 20x1, Marc Company enters into a contract with a customer to trans The initial franchise fee is P200,000, payable as follows: 20% cash down payment of the contract, and the balance is payable in four (4) equal annual installm December 31, 20X1. The appropriate discount rate is 10%. The contract also requires Marc Company to transfer equipment to the cu equipment has a cost of P30,000 and a stand-alone selling price of P50,000. The stand-alone selling price of P38,000. Marc Company regularly sells the license and the equipment separately. The transferred to the customer on January 15, 20x1, while the license is trans customer on February 1, 20x1. REQUIRED: Compute the following: 2. Transaction price allocated to license 3. Transaction price allocated to equipment 4. Franchise fee revenue
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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 revenueOn 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…On Nov. 1, 20x1, DRINK Co. entered into a franchise contract with TIPPLE Co. The franchise agreement requires an initial franchise fee that is payable as follows: 20% down payment at the signing of the contract, and the balance due in four equal annual payments starting November 1, 20x2. The license period is 4 years. The franchise contract requires DRINK Co. to undertake pre-opening activities necessary to setup the contract and post-opening activities that would further improve the intellectual property to which the franchisee has rights. All the preopening activities are completed, and TIPPLE Co. started operations, on January 31, 20x2. How should DRINK Co. recognize revenue from the initial franchise fee?
- 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 revenueOn January 1, 20x1 , ABC Co. enters into a contract with a customer to transfer a license for a fixed fee of P100,000 payable as follows: 20% is payable upon signing of contract. 80% is represented by a note receivable collectible in 4 equal annual installments starting December 31,20x1. The appropriate discount rate is 12%. The license transfers to the customers on January 1, 20x1. ABC Co. incurs direct contract costs of P20,000 on January 1, 20x1. On January 1, 20x1, ABC Co. determines that there is significant uncertainty as to the collectability of the note. The license provides the customer with the right to use ABC's intellectual property as it exists at the point in time at which the license is granted. a. The credit to contract liability on December 31, 20x1, is b. The credit to unearned interest income on December 31, 20x1 is c. The franchise revenue to be recorded in 20x1On December 31, 20x1, Entity A enters into a contract with Customer X to transfer a license for a fixed fee of₱100,000 payable as follows: -20% is payable upon signing of contract. -80% is represented by a note receivable collectible in 4 equal annual installments starting December 31, 20x2. The appropriate discount rate is 12%. Case #1:The license provides Customer X the right to use Entity A’s patented processes. Customer X continues to operateusing its trade name and has the discretion of developing a new product name for the products it will produceusing the patented processes. The license does not explicitly require Entity A to undertake activities that willsignificantly affect the intellectual property to which Customer A has rights. Neither does Customer X expect thatEntity A will undertake such activities. Entity A grants the license to Customer X on December 31, 20x1. How muchrevenue from the franchise contract will Entity A recognize in 20x1? Case #2:The license provides…
- SorCo. Inc. has just entered into a sale agreement with a customer. The contract is for $600,000. However, the payments will be made as follows: 1 August 20X1 on date of delivery $400,000; 1 August 20X2 $100,000 and 1 August 20X3 $100,000. SorCo has estimated that the interest rate required for this customer is 8%. SorCo follows IFRS. Required: Prepare the journal entry required to record the sale on 1 August 20X1 and the receipt of cash on 1 August 20X2 and 20X3. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations and round your final answers to the nearest whole dollar.)On December 31, 20x1, Entity A enters into a contract with Customer X to transfer a license for a fixed fee of₱100,000 payable as follows: -20% is payable upon signing of contract. -80% is represented by a note receivable collectible in 4 equal annual installments starting December 31, 20x2. The appropriate discount rate is 12%. Case #2:The license provides Customer X the right to use Entity A’s patented processes. The agreement requires CustomerX to discontinue using its trade name and instead use Entity A’s trade name. Customer X is bound by the terms ofthe contract to abide with Entity A’s policies on the use of the processes but is given the right to any subsequentmodifications to the processes. How much revenue from the franchise contract will Entity A recognize in 20x1?On December 31, 20x1, Entity A enters into a contract with Customer X to transfer a license for a fixed fee of₱100,000 payable as follows: 20% is payable upon signing of contract. 80% is represented by a note receivable collectible in 4 equal annual installments starting December 31, 20x2.The appropriate discount rate is 12%. The license provides Customer X the right to use Entity A’s patented processes. Customer X continues to operateusing its trade name and has the discretion of developing a new product name for the products it will produceusing the patented processes. The license does not explicitly require Entity A to undertake activities that willsignificantly affect the intellectual property to which Customer A has rights. Neither does Customer X expect thatEntity A will undertake such activities. Entity A grants the license to Customer X on December 31, 20x1. How muchrevenue from the franchise contract will Entity A recognize in 20x1?
- On december 31, 20x1 Eugene enter into a contract with Plankton to transfer a license for a fixed dee of 100000 payable as follows: 20% upon signing of contract and 80% in 4 equal annual installments starting December 31, 20x2. The appropriate discount rate is 12%. How much contract revenue will Eugene recognize in 20x1?Everglades Consultants takes out a loan in the amount of $375,000 on April 1. The terms of the loan include a repayment of principal in eight, equal installments, paid annually from the April 1 date. The annual interest rate on the loan is 5%, recognized on December 31. (Round answers to the nearest cent, if needed.) A. Compute the interest recognized as of December 31 in year 1. B. Compute the principal due in year 1.4.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?