On Jan 1, 2021, an entity grants a franchisee the right to operate a restaurant using its trade name for a 3 year period. The franchise agreement states an initial franchise fee of Php700,000, which includes Php100,000 for kitchen equipment which the entity will purchase for the franchisee plus a 10% royalty based on the franchisee's sales. The entity promise to undertake activities to support the franchise. The entity delivers the equipment on Feb 1, 2021. The restaurant opens on March 1, 2021 at which date the license period starts to run. The franchisee reports sales of Php3,000,000.00 for the year.

On Jan 1, 2021, an entity grants a franchisee the right to operate a restaurant using its trade name for a 3 year period. The franchise agreement states an initial franchise fee of Php700,000, which includes Php100,000 for kitchen equipment which the entity will purchase for the franchisee plus a 10% royalty based on the franchisee's sales. The entity promise to undertake activities to support the franchise. The entity delivers the equipment on Feb 1, 2021. The restaurant opens on March 1, 2021 at which date the license period starts to run. The franchisee reports sales of Php3,000,000.00 for the year.

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 11E

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