Reference no: EM132671890

Franchise Accounting.

BLACKPINK CORPORATION, which sells specialized sandwiches, charges an initial franchise fee of P 900,000 to Mrs. Jeny Choi on January 1, 2020 for the right to operate as a franchisee of BLACKPINK CORPORATION. Of this amount P 180,000 is payable when the agreement is signed and the balance is payable in 4 equal installment payments. In return for the payment of initial franchise fee, the franchisor will assist the franchisee to locate the site, supervise the construction activity and provide bookkeeping services. The credit rating of the franchisee indicates that the money can be borrowed at 10%. The present value of an ordinary annuity factor is 3.16987.

Problem 1: How much is the franchise revenue if the down payment is non-refundable, the collectability of the note is reasonably assured and there is substantial performance of services? (Round to nearest peso)

FAR.

Problem 2: On January 5, 2016, Middleton Co. purchased machinery. The machinery has an estimated useful life of eight years and an estimated salvage value of P30,000. The depreciation applicable to this machinery was P65,000 for 2018, computed by the sum-of-the-years'-digits method. The acquisition cost of the machinery was?