Reference no: EM132597717

On january 1, 2021 a franchisor entered into a franchise agreement with a franchisee which requires the latter to pay a non-refundable upfront fee of 800,000 at the signing of the contract and on-going payment of royalty equal to 5% of the sales of the franchisee. on the date of the signing of the contract, the franchisee paid the non-refundable upfront fee.

As part of the franchise agreement, the franchisor shall render the following performance obligation which are considered separate and distinct from one another

I. training personnel of the franchisee with stand alone selling price of 100,000.

II. Construction of the franchisee's building and landscape with stand alone selling price of 400,000.

III. Delivery of 1,000 units raw materials to franchisee with stand alone selling price of 300,000.

IV. Allowing the franchisee to use the franchisor's trademark and tradename for a term 10 years starting from January 1, 2021 with stand alone selling price 200,000.

As of the end of December 31, 2021, the accounting department of franchisor obtained the following information:

I. The franchisor was able to train seven out of ten personnel of the franchisee.

II. The percentage of completion of construction of the franchisee's building and landscape was estimated by the engineer and architect at 90% although the building was fully completed because the landscape was not yet started.

III. 600 unit of raw materials were already delivered to the franchisee.

IV. For the year ended December 31, 2021, the franchisor reported sales revenue amounting to 100,000 because it already started operation upon the construction of the building on October 1, 2021.

Question 1: What is the total revenue to be reported by the franchisor for the year ended December 31, 2021?