Reference no: EM132943272
On March 01, 2021, AshLloyd entered into a franchise contract with AshRald. The franchise agreement required the franchisee, AshRald, to pay a nonrefundable upfront fee in the amount of P1,440,000 and on-going payment of royalties equivalent to 5% of the sales of the franchisee. AshRald paid the non-refundable upfront fee on March 01, 2021.
In relation to the nonrefundable upfront fee, the franchise agreement required AshLloyd to render the following performance obligations:
- To construct the franchisee's stall with stand-alone selling price of P300,000.
- To supply cooking equipment and cash registers. Price of competitors for the similar items (cooking equipment and cash registers) is valued at P240,000 while the forecast of the expected cost of AshLloyd for the performance obligation is P200,000 plus an appropriate margin above cost of 25%.
- To deliver 10,000 units of raw materials to AshRald with stand-alone selling price of P460,000.
- To allow AshRald to use the entity's tradename for a period of 10 years starting on the inception of the contract with stand-alone selling price of P600,000.
During the year 2021, AshLloyd satisfied its performance obligations to supply cooking equipment and install cash registers, constructed the franchisee's stall and was able to deliver 6,000 units of raw materials to AshRald. For the year ended December 31, 2021, the franchisee reported sales revenue amounting to P720,000. The entity had determined that the performance obligations are separate and distinct from one another and accounted under PFRS 15.
Problem 1: What is the amount of the nonrefundable upfront fee to be allocated to the supply of cooking equipment and cash registers?
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: On March 01, 2021, What is the amount of the nonrefundable upfront fee to be allocated to the supply of cooking equipment and cash registers?
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