PROBLEM 6:

On January 1, 20x1, Plane Co. enters into a franchise contract with, a customer to grant the right to open a store in a specified location. The store will bear Plane Co.'s trade name and the franchisee will have the right to sell Plane's products for 7 years, starting on the store's commencement of operations. The contract requires P1,400,000 non-refundable up-front fee and royalty of 5% of a franchisee's subsequent sales. The upfront fee covers the following: a.Design for the fitting-out of the franchisee's store to conform to Plane's concept. The franchisee will engage a contractor to perform the work and will pay the contractor using its own funds. b.Trainings for both management and staff. c. Signage and promotional posters and pamphlets.

The franchise contract requires Plane Co. to maintain the brand through product improvements, marketing campaigns, research and development, and other activities that would strengthen the brand's marketing position.

The franchisee's new store opens on July 1, 20x1 and reports sales of P9 000 000 for the year.

Requirements: A. Apply "Steps 2 to 5" of PFRS 15 to identify the following: i.The performance obligation(s) in the contract and how the performance obligation(s) are satisfied. ii.Transaction price and its componetnts iii.Allocation of the transaction price iv.The recognition of revenue from the contract B.Provide all the necessary journal entries in20x1