Sr. Juan Inc. a franchisor, entered into a franchise agreement with Mang Pedro, franchisee, on March 31, 20x1. The total franchise fee is P500,000 of which P100,000 is payable upon signing and the balance was represented by a 10% interest bearing note payable in four equal annual installments. The down payment is non-refundable and represent a fair measure of service already performed. The five year franchise license provides Mang Pedro the right to use because the license to which Mang Pedro has rights will not change over the term of the license. On April 10, 20x1, Sr. Juan transfers the rights and provided all the necessary services required in the contract. Mang Pedro started its operation on April 12, 20x1. Case 1: What is the total revenue to be recorded on July 1, 20x1? Case 2: Which of the following statement is correct? a. A credit to interest income amounting to P13,333 b. A credit to Franchise Revenue of P100,000 on April 10, 20x1 c. A credit to Franchise Revenue account of P500,000 on April 12, 20x1 d. A credit to deferred revenue of P500,000 is recorded on March 31, 20x1
Sr. Juan Inc. a franchisor, entered into a franchise agreement with Mang Pedro, franchisee, on March 31, 20x1. The total franchise fee is P500,000 of which P100,000 is payable upon signing and the balance was represented by a 10% interest bearing note payable in four equal annual installments. The down payment is non-refundable and represent a fair measure of service already performed.
The five year franchise license provides Mang Pedro the right to use because the license to which Mang Pedro has rights will not change over the term of the license.
On April 10, 20x1, Sr. Juan transfers the rights and provided all the necessary services required in the contract. Mang Pedro started its operation on April 12, 20x1.
Case 1: What is the total revenue to be recorded on July 1, 20x1?
Case 2: Which of the following statement is correct?
a. A credit to interest income amounting to P13,333
b. A credit to Franchise Revenue of P100,000 on April 10, 20x1
c. A credit to Franchise Revenue account of P500,000 on April 12, 20x1
d. A credit to deferred revenue of P500,000 is recorded on March 31, 20x1
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