Jolibi, Inc. enters into an agreement with Ronald’s Co., clothing the later with full authority to operate as its franchise for a period of ten years. An initial franchise fee of P 275,000, among others, was stipulated in the contract and was promptly paid during the year 2008. Assuming that Jolibi was able to perform the initial services during 2008, what is the franchise revenue to be recognized in its year-end income statement? P 0 P 27,500 P 137,500 P 275,000
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- Jolibi, Inc. enters into an agreement with Ronald’s Co., clothing the later with full authority to operate as its franchise for a period of ten years. An initial franchise fee of P 275,000, among others, was stipulated in the contract and was promptly paid during the year 2008.
Assuming that Jolibi was able to perform the initial services during 2008, what is the franchise revenue to be recognized in its year-end income statement?
- P 0
- P 27,500
- P 137,500
- P 275,000
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- Consider the following situations and determine (1) which type of liability should be recognized (specific account), and (2) how much should be recognized in the current period (year). A. A business sets up a line of credit with a supplier. The company purchases $10,000 worth of equipment on credit. Terms of purchase are 5/10, n/30. B. A customer purchases a watering hose for $25. The sales tax rate is 5%. C. Customers pay in advance for season tickets to a soccer game. There are fourteen customers, each paying $250 per season ticket. Each customer purchased two season tickets. D. A company issues 2,000 shares of its common stock with a price per share of $15.JustKitchens Inc. provides services to restaurants and hotels. The company supplies paper products, tableware, cookware, restaurant and kitchen equipment, and cleaning supplies. On January 2, 2019, Just-Kitchens enters into a contract with a local restaurant chain to provide its services for 3 years at a cost of 10,000 per year. The restaurant chain pays the total contract fee on January 2, 2019. JustKitchenss stand-alone selling price is also 10,000 per year. After 2 years, the restaurant asks to modify the contract. On January 2, 2021, the companies agree to reduce the fee for the third year to 9,000 in exchange for extending the contract for 2 additional years at a fee of 11,000 per year. This modification is agreed to by both parties, and on that date the restaurant chain pays for the additional 2 years of service. The 11,000 fee for the additional years is the same as JustKitchenss stand-alone price. Required: 1. How should JustKitchens account for the contract modification? 2. Prepare the journal entry that JustKitchens would make over the life of the contract.On January 1, 2019, Mopps Corp. agrees to provide Conklin Company 3 years of cleaning and janitorial services. The contract sets the price at 12,000 per year, which is the normal standalone price that Mopps charges. On December 31, 2020, Mopps and Conklin agree to modify the contract. Mopps reduces the fee for the third year to 10,000, and Conklin agrees to a 4-year extension that will extend services through December 31, 2024, at a price of 15,000 per year. At the time that the contract is modified, Mopps is charging other customers 13,500 for the cleaning and janitorial service. Required: Should Mopps and Conklin treat the modification as a separate contract? If so how should Mopps account for the contract modification on December 31, 2020? Support your opinion by discussing the application to this case of the factors that need to be considered for determining the accounting for contract modifications.
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- 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…Accurate Company charges its new franchisees an initial franchise fee of P2,500,000. Of this amount, P1,000,000 is payable in cash when the agreement is signed, and the remainder is to be paid in three equal annual installments which are evidenced by 12% interest-bearing note. In consideration therefore, Accurate will assist in locating business site, conduct a market study to estimate earnings potential, supervise construction of a building, and provide initial training to employees. On December 1, 2021, Accurate entered into a franchising agreement with a franchisee. The franchise outlet was opened on January 15, 2022. Accurate had incurred a cost of P800,000 related to the franchise and it has ascertained that the collection of the note is reasonably assured.1. How much is the Franchise Revenue to be recognized in 2021? 2. How much is the Revenue to be recognized in 2022?On Jan. 2, 2016, Gino Services Inc. signed an agreement authoring Triple 8 Company to operate as a franchisee over a 20-year period for an initial franchise fee of 50,000 received when the agreement was signed. Triple 8 commenced operations on July 1, 2016, at which date all of the initial services required of Gino had been performed. The agreement also provides that Triple 8 must pay annually to Gino a continuing franchise fee equal to 5% of their gross sales. Triple 8 reported gross sales of 400,000 for 2016. For the year ended Dec. 31, 2016, how much should Gino record as revenue from franchise fees with respect to the triple 8 franchise? a. P70,000 b. P50,000c. P45,000 d. P22,500