Question
Problem 1 - On July 1, 2014, OG obtained a contract to construct a building. The building was estimated to be built at a total
Problem 1 - On July 1, 2014, OG obtained a contract to construct a building. The building was estimated to be built at a total cost of P 15,000,000 and is scheduled for completion on October 2016. The contract contains a penalty clause to the effect the other party was to deduct P 35,000 form the contract price for each week of delay. On the other hand, if the contractor was able finish the building earlier than agreed, it will be rewarded an amount equal to P 50,000 for every month of early completion. Furthermore, cost escalation clause was included in the contract. In 2015, the estimated costs of particular construction material amounting to P 520,000 were bought for P 780,000. The increase in the contract price related to this cost escalation was approved by the client. completion was delayed for 4 weeks. The records show:
Year..................................................................2014.........................2015................................2016.
Costs incurred...................................P 1,750,000.........P 6,440,000..................P 1,085,000.
Estimated cost to complete............7,000,000.............1,810,000.................................0.
Progress billings....................................1,400,000.............15,225,000......................4,200,000
REQUIRED:
1. What is the original contract price in 2014?
2. What is the original contract price in 2015?
3. What is the construction in progress, net as of 2015?
EX-1. On November 1, 2016, a franchisee bought a franchise from Max Turkey for a sales price of P 5,000,000 to sell Max Turkey's products for a period of 20 years. Their agreement provides that P 500,000 will be paid in advance and the balance in 5 equal annual installments, evidenced by a 9% promissory note; and Max Turkey will be responsible in making the feasibility study of the project and siex months training of the franchisee's staff and employees. The present value factors for the 9% rate follow:
Present value of P 1 for 5 periods 0.650
Present value of annuity of P 1 for 5 periods 3.890
Present value of annuity of P 1 for 5 periods (in advance) 4.240
Assuming collection of the note is reasonably assured, what is the amount of franchise revenue should Max Turkey recognize for the year ended December 31, 2016?
EX-2. Each of Potter Pie Co.'s 21 new franchisee contracted to pay an initial franchise fee of P 30,000. By December 31, 2016, each franchisee had paid a non-refundable P 10,000 fee and signed a note to pay P 10,000 principal plus the market rate of interest on December 31, 2017 and December 31, 2018. Experience indicates that one franchise will default on the additional payments. Services for the initial franchise fee will be performed in 2017.
What amount of net unearned franchise fees would Potter report at December 31, 2016?
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