M.A. Sarap Restaurant sold a fastfood restaurant franchise to M.A.Takaw Corporation. The sale agreement signed on January 2, 2023, called for a P80,000 down payment plus two P10,000 annual payments representing the value of initial franchise services rendered by M.A.Sarap. The present value of two annual payments appropriately discounted at 10% is P17,355. In addition, the agreement required the franchisee to pay 5% of its gross revenues to the franchisor; this was deemed sufficient to cover the cost and provide a reasonable profit margin on continuing franchise services to be performed by M.A.Sarap. The restaurant opened early in 2023 and its sales for the year amounted to P500,000. M.A.Sarap Restaurant's 2023 total revenue from the franchisee will be:

M.A. Sarap Restaurant sold a fastfood restaurant franchise to M.A.Takaw Corporation. The sale agreement signed on January 2, 2023, called for a P80,000 down payment plus two P10,000 annual payments representing the value of initial franchise services rendered by M.A.Sarap. The present value of two annual payments appropriately discounted at 10% is P17,355. In addition, the agreement required the franchisee to pay 5% of its gross revenues to the franchisor; this was deemed sufficient to cover the cost and provide a reasonable profit margin on continuing franchise services to be performed by M.A.Sarap. The restaurant opened early in 2023 and its sales for the year amounted to P500,000. M.A.Sarap Restaurant's 2023 total revenue from the franchisee will be:

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter5: Introduction To Business Expenses

Section: Chapter Questions

Problem 63P

See similar textbooks

Similar questions

On January 1, 2019, Park Company accepted a 36,000, non-interest-bearing, 3-year note from a major customer in exchange for used equipment. The equipment had originally cost Park 200,000 and had a book value of 20,000 on the date of the sale. At the 12% imputed interest rate for this type of loan, the present value of the note is 25,500 on January 1, 2019. Park uses the effective interest rate. What is the carrying value of the note receivable on Parks December 31, 2019, balance sheet? a. 28,560 b. 29,000 c. 32,500 d. 36,000
Suppose that Blake Companys total pretax difference from a change to FIFO was 100,000 and the company pays a bonus of 5% of its income before income taxes and bonus to employees. If Blake pays an additional bonus | based on the change in income, would it recognize any expense? If so, when and how much?
6.) Cho Nam Restaurant sold a fast-food restaurant franchise to Moon Corporation. The sale agreement signed on January 2, 2023, called for a P60,000 down payment plus two P20,000 annual payments representing the value of initial franchise services rendered by Cho Nam. The present value of two annual payments appropriately discounted at 10% is P34,710. In addition, the agreement required the franchisee to pay 5% of its gross revenues to the franchisor; this was deemed sufficient to cover the cost and provide a reasonable profit margin on continuing franchise services to be performed by Cho Nam. The restaurant opened early in 2023, and its sales for the year amounted to P500,000. Cho Nam Restaurant's 2023 total revenue from the Moon franchise will be:
4.) On December 31, 2023, Peter Company signed an agreement to operate as franchise of Wendy’s for a franchise fee of P80,000. Of this amount, P30,000 was paid upon signing of the agreement and the balance is payable in five annual payments of P10,000 each beginning December 31, 2023. The present value of the five payments, at an appropriate rate of interest, is P36,000 on December 31, 2023. The agreement provides that the down payment is not refundable, and no future services are required of the franchisor. The collection of the note receivable is reasonably certain. Wendy’s Company should report unearned revenue from franchise fee in its December 31, 2023, balance sheet at:
Nana Restaurant sold a fast-food restaurant franchise to Max Corporation. The saleagreement signed on January 2, 2018, called for a P60,000 down payment plus two P20,000 annualpayments representing the value of initial franchise services rendered by Nana Restaurant . Thepresent value of two annual payments appropriately discounted at 10% is P34,710. In addition,the agreement required the franchisee to pay 5% of its gross revenues to the franchisor; thiswas deemed sufficient to cover the cost and provide a reasonable profit margin on continuingfranchise services to be performed by Nana Restaurant . The restaurant opened early in 2018, and its salesfor the year amounted to P500,000.Nana Restaurant is 2018 total revenue from the Max franchise will be:
MIKE restaurant sold a fast food restaurant franchise to Irish. The sale agreement, signed in January 2020 called for a P100.000 down payment plus two P50,000 annual payments representing the value of initial franchise services rendered by MIKE restaurant. In addition, the agreement required the franchisee to pay 8% of its gross revenues to the franchisor. The restaurant opened early in 2020 and its sales for the year amounted to P750,000. The prevailing rate for the similar note was 12% (PV factor was 1.6901). a. How much is the Franchise Revenue for 2020? b. How much is the Continuing Franchise Fee for 2020? C. How much is the TOTAL Revenue for 2020? d. Journal Entries on January, Upon Opening of Franchise and December 31.
Pizza Pie Inc. entered into a franchise agreement on December 31, 2029, giving Freshly Bake Corp. the right to operate as a franchise of Pizza Pie for 5 years. Pizza Pie charged Freshly Bake an initial franchise fee of P50,000 for the right to operate as a franchisee. Of this amount P20,000 is payable when the food fight signs the agreement, and the note balance is payable in five annual payments of P6,000 each starting on December 31, 2020, as part of the arrangement. Pizza helps locate the site, negotiate the lease or purchase of the site, supervise the construction activity, and provide employee training and the equipment necessary to be a distributor of its products. Similar training services and equipment are sold separately. Freshly Bake also promises to pay ongoing royalty payments of 1% of its annual sales (payable each Jan. 31 of the following year) and is obliged to purchase products from pizza at its current stand-alone selling price at the same time of purchase. The credit…
4 On January 1, 2019, Daisy company signed an agreement to operate as a franchisee for an initial franchise fee of 9,600,000 for a period of 10 years. Of this amount 3,600,000 was paid when the agreement was signed and the balance payable in five annual installments of 1,200,000 at every year-end. The franchisee signed a non-interest bearing note for the balance. The market rate of interest for this note is 10%. The PV of 1 at 10% for 5 periods is 0.62, and the PV of an ordinary annuity of 1 at 10% for 5 periods is 3.79. In return for the initial franchise fee, the franchisor will help in locating the site, negotiate the lease or purchase the site, supervise the construction activity and provide training to employees. The initial services required of the franchisor are substantially performed. What is the amount of amortization of franchise in 2019?
1. On December 31, 2020, Rice, Inc. authorized Graft to operate as a franchisee for an initial franchise fee of P150,000. Of this amount, P60,000 was received upon signing of the agreement and the balance, represented by a note, is due in three annual payments of P30,000 each beginning December 31, 2021. The present value on December 31,2020 of the three annual payments appropriately discounted is P72,000. According to the agreement, the non- refundable down payment represents a fair measure of the services already performed by Rice; however, substantial future services are required of Rice. Collectability of the note is reasonably certain. a. in Rice’s December 31, 2020 balance sheet, unearned franchise fees from Graft’s franchise should be reported as?
1. On December 31, 2020, Rice, Inc. authorized Graft to operate as a franchisee for an initial franchise fee of P150,000. Of this amount, P60,000 was received upon signing of the agreement and the balance, represented by a note, is due in three annual payments of P30,000 each beginning December 31, 2021. The present value on December 31,2020 of the three annual payments appropriately discounted is P72,000. According to the agreement, the non-refundable down payment represents a fair measure of the services already performed by Rice; however, substantial future services are required of Rice. Collectability of the note is reasonably certain. a. in Rice’s December 31, 2020 balance sheet, unearned franchise fees from Graft’s franchise should be reported as? 2. Levi and Zeke agreed on a joint venture to purchase and sell car accessories. Their contract stipulates that the participants shall contribute P25,000 each to be used in purchasing the merchandise, share equally in any gain or…
1.) On November 30, 2022, Loveless Company authorized NBSB Corp. to operate as a franchisee for an initial franchise fee of P1,950,000. Of his amount, P750,000 was received upon signing the agreement, and the balance, represented by a note, is due in four annual payments starting November 30, 2023. Present value of P1 at 12% for 4 periods is 0.6355. Present value of an ordinary annuity of P1 at 12% for 4 periods is 3.0374. The period of refund will elapse on January 31, 2023. The franchisor has performed substantially all the initial services, but the operations of the store have yet to start. Collectability of the note is reasonably certain. Required: a.) How much is the unearned franchise fee on the year ended December 31, 2022?b.) How much is the earned franchise fee for the year ended December 31, 2022?
On January 1, 2022, Black Mamba Company signed an agreement to operate as a franchise of Doug company for an initial franchise fee of P30,000,000. Of this amount, P10,000,000 was paid when the agreement was signed and the balance is payable in equal annual payment of P5,000,000 beginning December 31, 2022. The agreement provides that the down payment is not refundable and no future services are required of the franchisor. Black Mamba’s credit rating indicates that it can borrow money at 12% for loan of this type. How much is the cost of franchise? A. 30,000,000 B. 25,186,000 C. 21,541,500 D. 19,065,000