Reference no: EM132952793
Pacific Crossburgers Inc. charges an initial fee of P70,000. Upon the signing of the agreement (which covers 3 years), a payment of P28,000 is due. Thereafter, three annual payments of P14,000 are required. The credit rating of the franchisee is such that it would have to pay interest at 10% to borrow money. The franchise agreement signed on May 1, 20x5, and the franchise commences operation on July 1, 20x5.
Problem 1. The amount of franchise revenue on May 1, 20x5 assuming no future services are required by the franchisor once the franchise starts operations:
a. Zero. c. P62,816
b. P28,000 d. P70,000
Problem 2. In relation to No. 1, the amount of franchise revenue on July 1, 20x5:
a. Zero. c. P62,816
b. P28,000 d. P70,000
Problem 3. The amount of franchise revenue on May 1, 20x5 assuming that the franchisor has substantial services to perform, once the franchise begins operations, to maintain the value of the franchise.
a. Zero. c. P62,816
b. P28,000 d. P70,000
Problem 4. In relation to No. 3, the amount of franchise revenue on December 31, 20x5:
a. Zero. c. P62,816
b. P13,959 d. P70,000
Problem 5. The amount of franchise revenue on May 1, 20x5 assuming that the total franchise fee includes training services (with a value of P2,400) for the period leading up to the franchise opening and for two (2) months following opening.
a. Zero. c. P62,816
b. P60,416 d. P70,000
Problem 6. In relation to No. 5, the amount of franchise revenue excluding service revenue - training on July 1, 20x5:
a. Zero. c. P61,616
b. P60,416 d. P63,616
Problem 7. In relation to Nos. 5 and 6, the amount of service revenue on September 1, 20x5:
a. Zero. c. P 2,400
b. P1,200 d. P70,000
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