Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

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

Horngrens Accounting The Financial Chapters

Authors: Tracie L. Miller Nobles, Brenda L. Mattison, Ella Mae Matsumura

10th Edition

0133117561, 978-0133117561

More Books

Students also viewed these Accounting questions

Question

How many applicants are you interviewing?

Answered: 1 week ago