Question
Pasta Inn charges an initial fee of P1,600,000 for a franchise, with P320,000 paid when the agreement is signed and the balance in four annual
Pasta Inn charges an initial fee of P1,600,000 for a franchise, with P320,000 paid when the agreement is
signed and the balance in four annual payments. The present value of the annual payments,
discounted at 10%, is P1,014,000. The franchisee has the right to purchase P60,000 of kitchen equipment
and supplies for P50,000. An additional part of the initial fee is for advertising to be provided by Pasta
Inn during the next five years. The value of the advertising is P1,000 a month. Collectibility of the
payments is reasonably assured and Pasta Inn has performed all the initial services required by the
contract. How much revenue from franchise fee be recognized when the agreement is signed?
a. Zero. c. P1,590,000
b. P1,264,000 d. P1,600,000
Chris Health Club enters into a contract on January 1, 20x8 with customers for one year access to gym,
swimming pool and tennis courts for P120,000 per year. Chris also charges a P18,000 nonrefundable
initiation fee to compensate for the administrative tasks to register the customer. How many
performance obligations exist in the contract?
a. 0 c. 2
b. 1 d. 3
The total transaction price of this arrangement - non-refundable upfront fee should be:
a. None c. P600,000
b. P18,000 d. P618,000
On January 2, 20x8 (time of sale/point in time), the recognize revenue amounted to:
a. None c. P 18,000
b. P11,500 d. P138,000
On December 31, 20x8, the recognize revenue amounted to:
a. P11,500 c. P120,000
b. P18,000 d. P138,000
Assume, however, that Chris allows customers to renew their membership without having to pay another
initiation fee upon renewal. Further, Chris determines that its customers, on average, remain members
for 5 years, the recognize revenue for 20x8 amounted to:
a. P 18,000 c. P123,600
b. P100,000 d. P618,000
Assume that a customer enrolls in AAA's Premier Membership, which provides 12 months of roadside
assistance for P120. On August 1, 20x6, a customer purchases a contract that runs from that date
through July 31, 20x7. Given that roadside assistance requests occur equally throughout the contract
period, AAA uses "proportion of time" as its measure of progress toward completion. The amount of
sales revenue on August 1?
a. Zero c. P 120
b. P 10 d. P1,440
Using the same information in No. 7, the sales revenue on December 31 amounted to:
a. Zero c. P 60
b. P 50 d. P120
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started