Question
On January 1, 2021, Entity A granted a franchise to Entity B involving a food stall. The franchise agreement requires Entity B to pay nonrefundable
On January 1, 2021, Entity A granted a franchise to Entity B involving a food stall. The franchise agreement requires Entity B to pay nonrefundable initial franchise fee amounting to 900,000 within ten days from the signing of document evidencing the franchise agreement. Moreover, the franchise agreement requires Entity B to pay contingent franchise fee equivalent to 10% of its sales revenue to Entity A. Entity B paid the initial franchise fee on January 10, 2021.
In relation to initial franchise fee on January 10, 2021 Entity A is required to render the following separate and distinct performance obligations:
a. To construct the food stall of Entity B which has stand-alone selling price of 500,000
b. To allow Entity B use its registered trademark and tradename for a period of 20 years starting January 1, 2021 which has stand-alone selling price of 200,000
C. To supply 5,000 units of raw materials to entity B which has stand-alone selling price of 300,000
On June 30, 2021. Entity A completed the construction of Entity B’s food stall. As of December 31, 2021, Entity has already delivered 2,000 units of raw materials to Entity B. B commenced its operations on October 1, 2021 and it reported sales revenue amounting to 330,000 for the period ended December 31, 2021. What is
A. the total revenue to be recognized by A for the period ended December 31, 2021.
B. the unearned revenue to be reported by A on December 31, 2021
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