1. A franchisor provides a range of computing services hardware/software installation, repairs, data backup, device syncing, and network solutions on popular Samsung, Dell, Acer and other PC devices. Each franchise agreement gives a franchisee the right to open a franchise outlet and sell products and services in the area for five (5) years. Under the contract, Franchisor also provides the franchisee with a number of services to support and enhance the franchise brand, including:

1. Advertising and consulting operations of the store;

2. Communicating new hardware and software developments and service techniques;

3. Providing business and training manuals;

4. Advertising programs and training

As an almost entirely service operation (all materials and other supplies are purchased as needed by the customers), franchisor provides few upfront services to franchisees. Instead, the franchisee recruits service technicians, who are given training materials, which are updated for technology changes, on a monthly basis at a minimum.

Franchisor enters into a franchise agreement on December 15, 2017, giving the franchisee the rights to operate the franchise in Cagayan Valley for five (5) years. The Franchisor charges an initial franchise fee of P975,000 for the right to operate as a franchisee, payable upon signing the contract. The franchisor also receives continuing fee of 7% of the franchisee's annual sales (payable each January 15 of the following year). The franchise company records P16,575,000 of revenue for the year ended December 31, 2018.

How many performance obligations exist in this contract of franchise?

Choices:

None

1

2

3

2. Using the given information in question no.3, the franchise revenue should be recognized:

Choices

No revenue

Point in time

Over time