Brave Corporation authorized Heart on January 1, 2010 to operate as a franchisee for an initial franchise fee of P2,500,000. Of this amount, P1,500,000 was received upon signing of the contract and the balance is due in two equal annual payments beginning January 1, 2011. The contract provides that the nonrefundable downpayment represents fair measure of the services already performed, however, substantial performance is still required of Brave. Collectibility of the note is reasonably certain. If the present value of the two annual payments is P895,000,

Brave Corporation authorized Heart on January 1, 2010 to operate as a franchisee for an initial franchise fee of P2,500,000. Of this amount, P1,500,000 was received upon signing of the contract and the balance is due in two equal annual payments beginning January 1, 2011. The contract provides that the nonrefundable downpayment represents fair measure of the services already performed, however, substantial performance is still required of Brave. Collectibility of the note is reasonably certain. If the present value of the two annual payments is P895,000,

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 19RE

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On December 31, 2011, Coffee Blends, Inc. signed an agreement authorizing Ms. De Jesus to operate as a franchisee for an initial franchise fee of P500,000. Of this amount, P200,000 was received upon signing of the agreement and the balance is due in three annual payments of P100,000 each beginning December 31, 2012. The agreement provides that the down payment (representing a fair measure of the substantial initial services rendered by Coffee Blends) is not refundable although some future services (insignificant) are yet to be performed. Ms. De Jesus’ credit rating is such that the collection of the note is reasonably assured. The present value at December 31, 2011 of the three payments discounted at 14% is P232,200. What is the amount of unearned franchise fee to be recorded by Coffee Blends, Inc. on December 31, 2011? a. P232,200b. P0c. P300,000d. P422,200
Brave Corporation authorized Heart on January 1, 2010 to operate as a franchisee for an initial franchise fee of P2,500,000. Of this amount, P1,500,000 was received upon signing of the contract and the balance is due in two equal annual payments beginning January 1, 2011. The contract provides that the nonrefundable downpayment represents fair measure of the services already performed, however, substantial performance is still required of Brave. Collectibility of the note is reasonably certain. If the present value of the two annual payments is P895,000, what amount of unearned franchise fees from Heart should Brave report on December 31, 2010?
On December 31, 2016, Crispy Cream, Inc. authorized J. Guerrero to operate as a franchisee for an initial franchisee fee of P1,500,000. Of this amount, P600,000 was received upon signing the agreement and the balance, represented by a note, is due in three annual payments, appropriately discounted is P720,000. According to the agreement, the non-refundable down payment represents a fair measure of the services already performed by Crispy Cream however, substantial future services are required of Crispy Cream. Collectability of the note isreasonably certain. On December 31, 2016, what entry should Crispy Cream record for the receipt of the initial franchise fee? a.Cash 600,000Notes Receivable 900,000Unearned interest income 180,000Franchise Revenue 600,000Unearned Franchise fees 720,000 b. Cash 600,000Notes Receivable…
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On January 1, 2011, Michael August signed an agreement to operate as a franchisee of Ivan Steven for an initial franchise fee of P2,000,000. The amount of P800,000 was paid when the agreement was signed, and thebalance is covered by a non-interest bearing note payable in five annual payments of P240,000 each, beginning January 1, 2012. The agreement provides that the downpayment is not refundable and that no future services are required of the franchisor. The franchisee’s credit rating indicates that he can borrow money at 11% for a loan of this type. The present value of an ordinary annuity of 1 at 11% for five periods is 3.69590.Requirements: Determine the amount that Ivan Steven should record as revenue from franchise fee on January 1,2011. On December 1, 20x1, CANOROUS Co. granted a 5-year franchise right to MELODIOUS, Inc. for an initial franchise fee of ₱400,000 and a 10% sales-based royalty. The initial franchise fee is non-refundable and due upon signing of the contract. At…
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