Please answer in good accounting form. Thankyou SAPPHIRE CO. charges new franchisees an initial fee of P5,000,000. Of this amount, P2,000,000 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 an interest-bearing promissory note. In consideration therefore, SAPPHIRE CO. will assist in locating the business site, conduct a market study to estimate earnings potential, supervise construction of a building, and provide initial training to employees. On December 3, 2021, Sapphire Co. entered into a franchising agreement with EMERALD, INC. by the end of the year, SAPPHIRE CO. has completed about 25% of the initial services at a cost of P300,000 and it has ascertained that collection of the notes is reasonably assured. For 2021, SAPPHIRE CO. should recognized franchise revenue of: A. 5,000,000 C. 1,700,000 B. 2,000,000
Please answer in good accounting form. Thankyou
SAPPHIRE CO. charges new franchisees an initial fee of P5,000,000. Of this amount, P2,000,000 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 an interest-bearing promissory note. In consideration therefore, SAPPHIRE CO. will assist in locating the business site, conduct a market study to estimate earnings potential, supervise construction of a building, and provide initial training to employees.
On December 3, 2021, Sapphire Co. entered into a franchising agreement
with EMERALD, INC. by the end of the year, SAPPHIRE CO. has completed
about 25% of the initial services at a cost of P300,000 and it has
ascertained that collection of the notes is reasonably assured.
For 2021, SAPPHIRE CO. should recognized franchise revenue of:
A. 5,000,000 C. 1,700,000
B. 2,000,000
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