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Problem 2: 5r. Juan Inc, a franchisor, entered into a franchise agreement to Mang Perdo, franchisee, on March 31, 20x1. The total franchise fee is
Problem 2: 5r. Juan Inc, a franchisor, entered into a franchise agreement to Mang Perdo, franchisee, on March 31, 20x1. The total franchise fee is P500,000 of which P100,000 is payable upon signing and the balance was represented by a 10% interest bearing note payable in four equal annual installments. The down payment is non refundable and represent a fair measure of service already performed. The franchise license provide Mang Perdo the right to use because the license to which Mang Perdo has rights will not change over the term of the license. On April 10, 20x1, Sr. Juan transfer the rights and provided all the necessary services required in the contract. Mang Perdo started its operation on April 12, 20x1. Req. 1: What is the total revenue to be recorded on July 1, 20x1? a. P113,333 c. P500,000 b. P510,000 d. P400,000 Req. 2: Assuming Sr. Juan recognized revenue over time because the entity undertakes activity that significantly affect the license. How much is the total revenue on July 1, 20x1? a. PO c. P10,000 b. P19.225 d. P35,000
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