How much is the contract liability at the inception

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Reference no: EM133234260

PROBLEM 1

The partners, C and D, share profits 3:2. However, C is to receive a yearly bonus of 20% of the profits, in addition to his profit share. The partnership made a net income for the year of P960,000 before the bonus.

Assuming C's bonus is computed on profit after deducting said bonus, how much profit share will D receive?

a. P307,200

b. P640,000

c. P320,000

d. P160,000

PROBLEM 2

Integrity Pizza charges initial franchise fee of P500,000 for the right to operate as a franchisee of Integrity Pizza. Of this amount, P100,000 is payable when the arrangement is signed and the balance is payable in five annual payments of P80,000 each. In return for the initial franchise fee, the franchisor will help locate the site, negotiate the lease or purchase of the site, supervise the construction activity, and provide the bookkeeping services. The credit rating of the franchisee indicates that money can be borrowed at 8%. (Round off present value factor to two decimal places.) 

How much is the contract liability at the inception of the contract?

Reference no: EM133234260

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