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How much is the Continuing Franchise Fee

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Question 1 - 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 Franchise Revenue for 2020?

d. Journal Entries on January, Upon Opening of Franchise and December 31

Question 2 - DJ Builders, Inc. has constantly used the percentage-of-completion method (over time) of accounting for construction-type contracts. During 2015, DJ started work on a P9,000,000 fixed-price construction contract that was completed in 2016. DJ's accounting records disclosed the following:

 

12/31/2015

12/31/2016

Cumulative contract costs incurred

P3,900,000

P6,300,000

Estimated total costs at completion

P7,800,000

P8,100,000

a. 2015 Revenue, Cost, and Gross Profit

b. 2015 Revenue, Cost, and Gross Profit

Reference no: EM133178866

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