Requirement – 3 (a)
Franchise arrangement and performance obligation
In a franchise transaction, the franchisor has multiple performance obligations. In franchise business, the franchisor gives the selling rights to the franchisee for a particular period. The franchisor provides the start-up services to the franchisee.
Therefore, the franchise involves a license to use the franchisor property and sales of the goods and service in the name of franchisor.
The revenue recognition principle
The revenue recognition principle refers to the revenue that should be recognized in the time period, when the performance obligation (sales or services) is completed by the company.
To discuss: The timing of revenue recognition of initial franchise fees revenue.
b)
To discuss: The manner in which the continuing fees is determined.
Want to see the full answer?
Check out a sample textbook solutionChapter 5 Solutions
Intermediate Accounting
- Question No:1 ABC company is a subsidiary of an MNC which has its business operations across Oman. The company has 15 branches in various part of the country. The internal audit department of the company consist of 15 audit executives with a chief internal auditor. The chief internal auditor and his staff are appointed by Chief Executive officer with reporting responsibility to finance director. The scope of the work and other matters relating to internal audit department is decided by the finance director. Required; Do you find any internal control issues in the company? Do you think that the internal audit department staff can perform their functions independently? Discuss? ( Note: Explain with not less than 150 words)arrow_forward12 - CODE AND NAME OF THE ACCOUNT WILL BE DEBT 102 02 X BANK DTH DOLAR XXX120 02 INTERNATIONAL BUYER XXX646 02 IR. CHANGE DIFFERENCE XXXWhich transaction does the journal entry belong to? A) Collection record of the export in the current periodB) Import fee transfer recordC) Foreign income registrationD) Recording of the return of the export priceE) Registration of collection in the next period of the exportarrow_forwardInternational Accounting Standards and Bonus Compensation The International AccountingStandards Board (ww.ifrs.org) is a London-based independent organization that develops and interprets International Financial Reporting Standards (IFRS). The mission of the IASB is to develop asingle set of high-quality, globally accepted accounting standards. About 150 countries throughoutthe world either permit or require IFRS for publicly held companies in their country. The U.S.continues to use generally accepted accounting principles (GAAP) as developed by the U.S.-basedFinancial Accounting Standards Board (FASB). The FASB, under the guidance of the SEC, hasdeveloped a plan in which the FASB and the IASB work together to complete a convergence ofIFRS and GAAP. The timetable for convergence is not firmly set, but many believe it may be onlya matter of time before U.S. firms will be using IFRS or something very much like it. Some of thenotable differences between GAAP and IFRS are that IFRS does…arrow_forward
- Question 22. A complete commercial invoice can be used for accounting for duties instead of Canada Custom invoice. True Falsearrow_forward. _______ Foreign licensing is similar toa. starting from scratch.b. franchising.c. wholesaling.d. establishing a subsidiary in another country.e. establishing a sales office in a foreigncountry.arrow_forwardCodification Situation You are conducting an accounting research project for your boss. Your boss has asked you to determine the appropriate U.S. GAAP that specifies how your company should recognize revenues from the sales of products in a retail store. Your boss is confused because most customers pay cash, but some customers purchase on credit terms, and pay in cash 30 days later. Your manager also wants you to determine the GAAP guidance for how revenue should be recognized in income. Your manager has a lot of knowledge and experience in accounting and has heard about, but has never used, the FASB Accounting Standards Codification system. Directions Use the FASB Accounting Standards Codification system to conduct the research your manager has assigned to you. Use the Codification to determine how to recognize revenue from retail sales, including the right to return. Be prepared to show your manager the specific FASB ASC references that provide the appropriate guidance. Also prepare a brief memo explaining to your manager the different levels of the Codification and how to use the Codification system.arrow_forward
- Question 7: Contingencies Please answer the following questions using the information below taken from the footnotes to a firm's 2021 financial statements (US firm following US GAAP): Note 11: Contingencies We are also subject to other government inquiries and investigations relating to our business activities and disclosure practices. For example, beginning in September 2021, we became subject to government investigations and requests relating to a former employee's allegations and release of internal company documents concerning, among other things, our algorithms, advertising and user metrics, and content enforcement practices, as well as misinformation and other undesirable activity on our platform, and user well-being. Beginning on October 27, 2021, multiple putative class actions were filed in federal court in the United States against us and certain of our directors and officers alleging violations of securities laws in connection with the same matters. We believe these lawsuits…arrow_forwardAccounts Payable Subsidiary Ledger The debits and credits from two transactions are presented in the following creditor's (supplier's) account: NAME Migrant Technology ADDRESS 2199 Commerce Place Debit Date Item Post. Ref. Credit Balance Balance Nov. 1 9,400 Nov. 11 Invoice No. 85 P8 1,845 11,245 Nov. 22 Invoice No. 43 CP46 3,270 7,975 Select the choice that describes each transaction and the source of each posting. Date Journal Page Action Invoice No. Posted From Nov. 11 Nov. 22arrow_forward33 - What is the record to be made when the company pays a debt that arises from the purchase of goods on credit, by paying a check from a customer by endorsement?A) CODE AND NAME OF THE ACCOUNT WILL RECEIVE DEBT COMMERCIAL GOODS XX SELLERS XXB) CODE AND NAME OF THE ACCOUNT WILL RECEIVE DEBT SELLERS XX CHECKS RECEIVED XXC) THE CODE AND NAME OF THE ACCOUNT WILL BE DEBT COMMERCIAL GOODS XX CHECKS RECEIVED XXD) CODE AND NAME OF THE ACCOUNT WILL BE DEBT SELLERS XX CHECK GIVEN AND PAYMENT ORDERS. XXE) THE CODE AND NAME OF THE ACCOUNT WILL RECEIVE DEBT CHECK GIVENarrow_forward
- Examine Figure 6.18, which contains the REA model for Hera Industrial Supply (HIS). The model is partially completed; it includes all entities and relationships, but it does not include cardinalities or descriptions of the relationships (which would appear in diamonds on the connecting lines between entities). HIS sells replacement parts for packaging machinery to companies in several states. HIS accepts orders via telephone, fax, and mail. When an order arrives, one of the salespersons enters it as a sales order. The sales order includes the customers name and a list of the inventory items that the customer wants to purchase. This inventory list includes the quantity of each inventory item and the price at which HIS is currently selling the item. When the order is ready to ship, WIS completes an invoice and records the sale. Sometimes, inventory items that a customer has ordered are not in stock. In those cases, HIS will ship partial orders. Customers are expected to pay their invoices within 30 days. Most customers do pay on time; however, some customers make partial payments over two or more months. List each entity in the REA model, and identify it as a resource, event, or agent. Using Microsoft Visio, redraw the REA model to include the diamonds for each relationship and include an appropriate description in each diamond. FIGURE 6.18 Partially Completed REA Model of the Hera Industrial Supply Sales Businessarrow_forward11 Motor Sales Inc. signs an instrument that promises to pay National Parts Company a certain price, with interest, for a shipment of auto parts. It is necessary to know when the instrument is due in order to a. know when the interest will accrue. b. all of the choices. c. determine the value of the instrument. d. calculate when a statute of limitations may apply. 12 To operate practically as a substitute for cash or a credit device, a negotiable instrument must be a. conditional without the risk of being collectable. b. qualified with a promise to set aside the qualification. c. payable without recourse. d. transferable without the danger of being uncollectable Sport Souvenir LLC orders a gross of printed shirts from T-Shirt Company. To finance the purchase, the buyer signs a note to pay the seller from the funds paid to the buyer on the sale of the…arrow_forwardAccounts Payable Subsidiary Ledger The debits and credits from two transactions are presented in the following creditor's (supplier's) account: Hellman Services Inc. NAME ADDRESS 2199 Commerce Place Debit Date Item Post. Ref. Credit Balance Nov. 1 Balance 487 Nov. 11 Invoice No. 214 CP121 239 248 Nov. 22 Invoice No. 204 P36 155 403 Select the choice that describes each transaction and the source of each posting. Date Action Invoice No. Posted From Journal Page Nov. 11 Nov. 22arrow_forward
- Accounting Information SystemsFinanceISBN:9781337552127Author:Ulric J. Gelinas, Richard B. Dull, Patrick Wheeler, Mary Callahan HillPublisher:Cengage LearningCentury 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:Cengage
- Business/Professional Ethics Directors/Executives...AccountingISBN:9781337485913Author:BROOKSPublisher:CengagePrinciples of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College