15. On Jan. 1, 20x1, Hurt Co. entered into a franchise agreement with Hero Co. The franchise contract gives Hero Co. the right to use Hurt's trademark and proprietary processes for a period of 4 years. The franchise requires payment of an upfront fee of P1,000,000, payable at contract inception, and 5% monthly royalty based on sales. Aside from the granting of the license, the franchise agreement also requires Hurt Co. to undertake pre-opening activities to setup the contract and post- commencement activities, such as research and development and marketing campaigns, to support the intellectual property. Although the activities do not result in the direct transfer of a good or service to Hero Co. as the activities occur, it is expected that Hero Co. will benefit from them. All the necessary preparations were completed and Hero Co. started business operations on January 31, 20x1. Hero had total sales of P9,000,000 in 20x1. How much revenue would Hurt Co. recognize in 20x1? a. 1,450,000 b. 700,000 c. 679,167 d. 489,310

15. On Jan. 1, 20x1, Hurt Co. entered into a franchise agreement with Hero Co. The franchise contract gives Hero Co. the right to use Hurt's trademark and proprietary processes for a period of 4 years. The franchise requires payment of an upfront fee of P1,000,000, payable at contract inception, and 5% monthly royalty based on sales. Aside from the granting of the license, the franchise agreement also requires Hurt Co. to undertake pre-opening activities to setup the contract and post- commencement activities, such as research and development and marketing campaigns, to support the intellectual property. Although the activities do not result in the direct transfer of a good or service to Hero Co. as the activities occur, it is expected that Hero Co. will benefit from them. All the necessary preparations were completed and Hero Co. started business operations on January 31, 20x1. Hero had total sales of P9,000,000 in 20x1. How much revenue would Hurt Co. recognize in 20x1? a. 1,450,000 b. 700,000 c. 679,167 d. 489,310

SWFT Comprehensive Volume 2019

42nd Edition

ISBN:9780357233306

Author:Maloney

Publisher:Maloney

Chapter14: Property Transactions: Capital Gains And Losses, § 1231, And Recapture Provisions

Section: Chapter Questions

Problem 7DQ

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