Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

1. How many performance obligations exist in this contract for franchise? A. 2 B. 3 C. 4 D. 5 Diamond's Pizza Inc. enters into a

1. How many performance obligations exist in this contract for franchise?

A. 2

B. 3

C. 4

D. 5

image text in transcribed
Diamond's Pizza Inc. enters into a franchise agreement on December 31, 2019, giving Domino Corp. the right to operate as a franchisee of Diamond's Pizza for 5 years. Diamond charges Domino an initial franchisee fee of P475,000 for the right to operate as a franchisee. Of this amount, P190,000 is payable when Domino Corp. signs the agreement, and the balance is payable in five annual payments of P57,000 each on December 31. Consider the following for allocation of the transaction price at December 2019. Rights to the trade name, market area, technical and propriety know-how P190,000.00 Services - training, etc 94,591.50 Machinery and equipment etc. (costing, P95, 000) 133,000.00 Total Transaction price P417,591.50 The credit rating of Domino indicates that money can be borrowed at 8%. The present value of an ordinary annuity of five annual receipts of P57,000 each discounted at 8% is P227, 591.50. The discount of P57,408.50 represents the interest revenue to be accrued by Diamond's Pizza Inc. over the payment period. Training is completed in January 2020, the equipment is installed in January 2020 and Domino holds a grand opening on February 4, 2020. On February 4, 2020 the franchise opens. Domino also promises to pay on going royalty payments of 1% of its annual sales (payable every January 31 of the following year) and is obliged to purchase products from Diamond's at its current stand alone selling prices at the time of purchase

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Tort Law And Alternatives Cases And Materials

Authors: Marc Franklin, Robert Rabin, Michael Green, Mark Geistfeld, Nora Engstrom

11th Edition

164708489X, 978-1647084899

More Books

Students also viewed these Law questions

Question

2. Find five metaphors for communication.

Answered: 1 week ago