On January 1, 20x1, an entity granted a franchise to a franchisee. The franchise agreement required the franchisee to pay a nonrefundable upfront fee in the amount of P480,000 and ongoing payment of royalty equivalent to 8% of the sales to the franchisee. The franchisee paid the nonrefundable upfront fee on January 1, 20x1. In relation to the nonrefundable upfront fee, the franchise agreement required the entity to render the following performance obligations: a. To construct the franchisee's stall with a stand-alone selling price of P240,000. b. To deliver 10,000 units of raw materials to the franchisee with a stand-alone selling price of P300,000. c. To allow the franchisee to use the entity's tradename for 10 years starting January 1, 20x1, with a stand-alone selling price of P60,000. On June 30, 20x1, the entity completed the construction of the franchisee's stall. On December 31, 20x1, the entity was able to deliver 4,000 units of raw materials to the franchisee. For the year ended December 31, 20x1, the franchisee reported sales revenue amounting to P150,000. The entity had determined that the performance obligations are separate and distinct from one another. REQUIRED: Determine the amount to be recognized for the year ended December 31, 20x1: 1. Amount allocated to the construction of franchisee's stall 2. Revenue pertaining to the use of delivery of raw materials 3. Revenue pertaining to the use of tradename
On January 1, 20x1, an entity granted a franchise to a franchisee. The franchise agreement required the franchisee to pay a nonrefundable upfront fee in the amount of P480,000 and ongoing payment of royalty equivalent to 8% of the sales to the franchisee. The franchisee paid the nonrefundable upfront fee on January 1, 20x1. In relation to the nonrefundable upfront fee, the franchise agreement required the entity to render the following performance obligations: a. To construct the franchisee's stall with a stand-alone selling price of P240,000. b. To deliver 10,000 units of raw materials to the franchisee with a stand-alone selling price of P300,000. c. To allow the franchisee to use the entity's tradename for 10 years starting January 1, 20x1, with a stand-alone selling price of P60,000. On June 30, 20x1, the entity completed the construction of the franchisee's stall. On December 31, 20x1, the entity was able to deliver 4,000 units of raw materials to the franchisee. For the year ended December 31, 20x1, the franchisee reported sales revenue amounting to P150,000. The entity had determined that the performance obligations are separate and distinct from one another. REQUIRED: Determine the amount to be recognized for the year ended December 31, 20x1: 1. Amount allocated to the construction of franchisee's stall 2. Revenue pertaining to the use of delivery of raw materials 3. Revenue pertaining to the use of tradename
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On January 1, 20x1, an entity granted a franchise to a franchisee. The franchise agreement required the
franchisee to pay a nonrefundable upfront fee in the amount of P480,000 and ongoing payment of royalty
equivalent to 8% of the sales to the franchisee. The franchisee paid the nonrefundable upfront fee on January
1, 20x1.
In relation to the nonrefundable upfront fee, the franchise agreement required the entity to render the following
performance obligations:
a. To construct the franchisee's stall with a stand-alone selling price of P240,000.
b. To deliver 10,000 units of raw materials to the franchisee with a stand-alone selling price of P300,000.
c. To allow the franchisee to use the entity's tradename for 10 years starting January 1, 20x1, with a
stand-alone selling price of P60,000.
On June 30, 20x1, the entity completed the construction of the franchisee's stall. On December 31, 20x1, the
entity was able to deliver 4,000 units of raw materials to the franchisee. For the year ended December 31,
20x1, the franchisee reported sales revenue amounting to P150,000.
The entity had determined that the performance obligations are separate and distinct from one another.
REQUIRED: Determine the amount to be recognized for the year ended December 31, 20x1:
1. Amount allocated to the construction of franchisee's stall
2. Revenue pertaining to the use of delivery of raw materials
3. Revenue pertaining to the use of tradename
4. Total franchise fee revenue
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