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How much total revenue is recognized

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Q1. On July 1, 20x1, Wash Co. grants a franchisee the right to sell Wash Co.'s products in a specific market over a period of 10 years. The franchise contract requires an upfront fee of P800,000, which includes P100,000 for equipment that Wash Co. will provide to the franchisee. The amount reflects the stand-alone selling price of the equipment. In addition, the franchisee will pay a 10% sales-based royalty. Wash Co. has granted similar rights to other franchisees in other locations. Wash Co. regularly undertakes activities that promote the brand name nationally. Wash delivers the equipment to the franchisee on July 15, 20x1. The franchisee starts selling the products on August 1, 20x1 and reports total sales of P600,000 for the year. How much total revenue is recognized from the contract in 20x1?

a. 860,000

b. 760,000

c. 213,259

d. 189,167

Q2. On January 1, 20x1, Baguio Beans, a well-known basketball team, licenses the use of its name and logo to a customer. The customer, an apparel designer, has the right to use Baguio Beans' name and logo on items including t-shirts, caps, mugs and towels for two years. In exchange for providing the license, Baguio Beans will receive a fixed consideration of P200,000 and a royalty of 20% of the sales price of any items using the team name or logo. The customer expects that Baguio Beans will continue to play games and provide a competitive team. The license is transferred to the customer at contract inception. The customer reports sales of P1,000,000 for the year. How much revenue will Baguio Beans recognize from the contract in 20x1?

a. 400,000

b. 300,000

c. 200,000

d. 100,000

Q3. On January 1, 20x1, Feedback, a music record label, licenses to a customer a 1975 recording of a classical symphony by a noted orchestra. The customer, a consumer products company, has the right to use the recorded symphony in all commercials, including television, radio and online advertisements for 2 years in the Philippines. In exchange for providing the license, Feedback receives a fixed consideration of P10,000 per month. The contract does not include any other goods or services to be provided by Feedback. The contract is non-cancellable. The license is transferred to the customer on January 1, 20x1. The appropriate discount rate is 12%. How much contract revenue (excluding interest revenue) will Feedback recognize in 20x1?

a. 120,000

b. 240,000

c. 202,806

d. 212,434

Reference no: EM132936226

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