Reference no: EM132603282

Questions -

Q1. Hot Pizza granted a franchise to Shake King. Shake King was to pay a franchise fee of P 100,000 payable in five equal annual installments starting with the payment upon signing of the agreement. The franchisee was to pay monthly 1% of gross sales of the preceding month. Should the operation of the outlet prove to be unprofitable, the franchise may be cancelled with whatever obligation owing Hot Pizza, in connection with the P 100,000 franchise fee, waived. The first year of operations generated a gross sales of P 500,000. For the first year, Hot Pizza earned franchise fee of?

Q2. Krebs Crabs, Inc. franchisor, entered into a franchise agreement with Liwayway Ligaya, franchisee, on July 1, 2016. The total franchise fees agreed upon is P 1,100,00 of which P 100,000 is payable upon signing and the balance payable in four equal annual installments, it was agreed that the down payment is not refundable, notwithstanding lack of substantial performance of services by franchisor.

When Krebs prepares its financial statements on July 31, 2016, the unearned franchise fees to be reported is?

Q3. On November 1, 2016, GSW, Inc. authorized Steve Kerr to operate a franchisee for an initial franchise fee of P 1,500,000. Of this amount, 40% was received upon contract signing and the balance, represented by a note, is due in three annual installments starting December 31, 2016. A 65-day period of refund was granted. According to the agreement, the down payment represents a fair measure of the services initially performed. The collectability of the note is reasonably certain. PV factor of 2.4. What is the unearned franchise fee at December 31, 2016?