On Jan. 1, 2020, ABC Franchisor and XYZ Franchisee signed a franchise contract over the use of ABC's logos and brand in the latter's T-shirt shop. The contract requires P400,000 cash as payment from the franchisee. ABC will give the right to use its intellectual property to XYZ from April 1, 2020 to Mar. 31, 2025. If the contract is cancelled within 30 days from signing, 70% of the cash payment may be refunded. If cancelled on the 31st day and until the day before grant date, 10% can be refunded. ABC and XYZ both expect that ABC will exert effort over its marketing campaign and continue to grow its brand in the next 5 or more years. What is the compound journal entry on Dec. 31, 2020 if the contract is cancelled? [A] DR: Contract Liability – 400,000 CR: Franchise Revenue - 400,000 [B] DR: Contract Liability - 400,000 CR: Gain on Contract Cancellation - 400,000 [C] DR: Contract Liability – 400,000 CR: Franchise Revenue - 80,000 CR: Gain on Contract Cancellation - 320,000 [D] DR: Contract Liability – 400,000 CR: Franchise Revenue - 60,000 CR: Gain on Contract Cancellation - 340,000
On Jan. 1, 2020, ABC Franchisor and XYZ Franchisee signed a franchise contract over the use of ABC's logos and brand in the latter's T-shirt shop. The contract requires P400,000 cash as payment from the franchisee. ABC will give the right to use its intellectual property to XYZ from April 1, 2020 to Mar. 31, 2025. If the contract is cancelled within 30 days from signing, 70% of the cash payment may be refunded. If cancelled on the 31st day and until the day before grant date, 10% can be refunded. ABC and XYZ both expect that ABC will exert effort over its marketing campaign and continue to grow its brand in the next 5 or more years. What is the compound journal entry on Dec. 31, 2020 if the contract is cancelled? [A] DR: Contract Liability – 400,000 CR: Franchise Revenue - 400,000 [B] DR: Contract Liability - 400,000 CR: Gain on Contract Cancellation - 400,000 [C] DR: Contract Liability – 400,000 CR: Franchise Revenue - 80,000 CR: Gain on Contract Cancellation - 320,000 [D] DR: Contract Liability – 400,000 CR: Franchise Revenue - 60,000 CR: Gain on Contract Cancellation - 340,000
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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![On Jan. 1, 2020, ABC Franchisor and XYZ Franchisee signed
a franchise contract over the use of ABC's logos and brand in
the latter's T-shirt shop. The contract requires P400,000 cash
as payment from the franchisee. ABC will give the right to use
its intellectual property to XYZ from April 1, 2020 to Mar. 31,
2025. If the contract is cancelled within 30 days from signing,
70% of the cash payment may be refunded. If cancelled on
the 31st day and until the day before grant date, 10% can be
refunded. ABC and XYZ both expect that ABC will exert effort
over its marketing campaign and continue to grow its brand in
the next 5 or more years. What is the compound journal entry
on Dec. 31, 2020 if the contract is cancelled?
[A] DR: Contract Liability – 400,000
CR: Franchise Revenue - 400,000
Contract Liability – 400,000
[B] DR:
CR: Gain on Contract Cancellation – 400,000
[C] DR: Contract Liability – 400,000
CR: Franchise Revenue - 80,000
CR: Gain on Contract Cancellation - 320,000
[D] DR: Contract Liability – 400,000
CR: Franchise Revenue - 60,000
CR: Gain on Contract Cancellation - 340,000](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F925dba2e-5496-4bec-824d-e314c61db5bd%2Fb04d5d0a-c94a-4ff5-9e1c-6b88ff03e8df%2F6fmngpo_processed.jpeg&w=3840&q=75)
Transcribed Image Text:On Jan. 1, 2020, ABC Franchisor and XYZ Franchisee signed
a franchise contract over the use of ABC's logos and brand in
the latter's T-shirt shop. The contract requires P400,000 cash
as payment from the franchisee. ABC will give the right to use
its intellectual property to XYZ from April 1, 2020 to Mar. 31,
2025. If the contract is cancelled within 30 days from signing,
70% of the cash payment may be refunded. If cancelled on
the 31st day and until the day before grant date, 10% can be
refunded. ABC and XYZ both expect that ABC will exert effort
over its marketing campaign and continue to grow its brand in
the next 5 or more years. What is the compound journal entry
on Dec. 31, 2020 if the contract is cancelled?
[A] DR: Contract Liability – 400,000
CR: Franchise Revenue - 400,000
Contract Liability – 400,000
[B] DR:
CR: Gain on Contract Cancellation – 400,000
[C] DR: Contract Liability – 400,000
CR: Franchise Revenue - 80,000
CR: Gain on Contract Cancellation - 320,000
[D] DR: Contract Liability – 400,000
CR: Franchise Revenue - 60,000
CR: Gain on Contract Cancellation - 340,000
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