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AA Exer Sum 2021 Week 3C

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Edemson Navales
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161 views

AA Exer Sum 2021 Week 3C

Uploaded by

Edemson Navales
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF or read online on Scribd
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Franchise Accounting - 447 Problem 10-1 On January 2, 2016, Mr. A. Cion entered into a franchise i ibi, sell Jolibi products. The agreement provides of ah initial fenchise foe 000, payable as follows: P12,000,000 cash to be paid upon signing of the contract, and the balance in four equal annual payments every December 31. Mr. A. Cion signs 10% interest-bearing note for the balance. The agreement further provides that the franchisor will assist the franchisee in locating the business site, desigring and supervision in the construction of the building, and training of management and employees. The agreement also provides that the franchisee must pay a continuing franchise fees equal to 5% ofits monthly gross sales. On July 31, 2016, the franchisor completed the initial services required in the contract at acosts of P2,000,000. The franchisee commenced business operations on November 2, 2016. The gross sales reported by the franchisee to the franchisor are: November sales, P580,000; and December sales P720,000. f _ Required: Prepare all entries for 2016 in the books of the franchisor under the following assumptions: ae a. The collection of the note is reasonably assured. b. Thecollection of the note is not reasonably assured. Problem 10-2 ; é On January 5, 2016, Ms. Nancy Lee signed an agreement to operate as afranchisee of Street Pizza, Inc. for an initial franchise fee of P1 ,600,000..Of this amount P600,000 was paid when the agreement was signed and the balance payable in five annual payments of P200,000 beginning December 31; 2016. Ms. Lee signed anon-interest bearing note for the balance. Ms. Lee’s credit rating indicates that it can borrow money at 20% interest for'a loan of this type. The present value of an annuity of P1 at 20% for 5 periods is P2.9906, The contract includes a continuing franchise fees of 5% of the - franchisee’s gross sales, to be collected monthly. i . ; On November 25, 2016, the franchisor substantially performed the initial services provided in the contract at a cost of P179,718. The franchisee commenced operations on December 1, 2016. The gross sales of Ms. Lee for the month of December is P80,000. ! 7 : Required: Prepare all entries on the books of the franchisor for 2016: a, Assuming the collection of the note is reasonably assured: va b. Assuming the collection of the note is not reasonably assured. Scanned with CamScanner Triple G Inc. sells franchises for fast food outlets'in different parts of Mindanao. One such contract has been signed on January 10, 2016. The agreement provides for an . initial franchise fee of P6,000,000 by the franchisee at the signing of the contract. The franchisor’s initial services costs are P2,250,000, to be incurred uniformly over the six- month period prior to the scheduled opening date of July 15, 2016. No future payments are to be made by the franchisee, although there will be continuing franchise fees of P180,000 per year for continuing services to be rendered by the franchisor. The normal return for the franchisor on continuing operations involving other such franchise outlets is 10%. ; : Required: Prepare journal entries on the books of the franchisor to record all transactions through July 15, 2016. Support your entries with the necessary computations. Scanned with CamScanner

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