.On April 1,2021, Beauty Company purchased a franchise for P3,000,000. In addition, the franchise contract stipulates that Beauty shall pay to the franchisor, 5% of its sales exceeding P6,000,000, payable at the end of the month following the end of every quarter. For the nine months ended Dec. 31, 2021, Beauty's s sales amounts to P8,500,000. The estimated useful life of the franchise is 10 years. It is the company's policy to amortize to the nearest month. What is the carrying value of the franchise at December 31, 2022?

.On April 1,2021, Beauty Company purchased a franchise for P3,000,000. In addition, the franchise contract stipulates that Beauty shall pay to the franchisor, 5% of its sales exceeding P6,000,000, payable at the end of the month following the end of every quarter. For the nine months ended Dec. 31, 2021, Beauty's s sales amounts to P8,500,000. The estimated useful life of the franchise is 10 years. It is the company's policy to amortize to the nearest month. What is the carrying value of the franchise at December 31, 2022?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter17: Advanced Issues In Revenue Recognition

Section: Chapter Questions

Problem 7C: On January 1, 2019, Mopps Corp. agrees to provide Conklin Company 3 years of cleaning and janitorial...

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On January 1, 2019, Mopps Corp. agrees to provide Conklin Company 3 years of cleaning and janitorial services. The contract sets the price at 12,000 per year, which is the normal standalone price that Mopps charges. On December 31, 2020, Mopps and Conklin agree to modify the contract. Mopps reduces the fee for the third year to 10,000, and Conklin agrees to a 4-year extension that will extend services through December 31, 2024, at a price of 15,000 per year. At the time that the contract is modified, Mopps is charging other customers 13,500 for the cleaning and janitorial service. Required: Should Mopps and Conklin treat the modification as a separate contract? If so how should Mopps account for the contract modification on December 31, 2020? Support your opinion by discussing the application to this case of the factors that need to be considered for determining the accounting for contract modifications.
On April 1,2021, Beauty Company purchased a franchise for P3,000,000. In addition , the franchise contract stipulates that Beauty shall pay to the franchisor, 5% of its sales exceeding P6,000,000, payable at the end of the month following the end of every quarter. For the nine months ended Dec. 31, 2021, Beauty's s sales amounts to P8,500,000. The estimated useful life of the franchise is 10 years. It is the company’s policy to amortize to the nearest month.What is the carrying value of the franchise at December 31, 2022? How much is the amortization expense for the year 2021?
On April 1,2021, Red Company purchased a franchise for P3,125,000. In addition, the franchise contract stipulates that Red shall pay to the franchisor, 5% of its sales exceeding P5,000,000, payable at the end of the month following the end of every quarter. For the nine months ended Dec. 31, 2021, Red company's sales amounts to P8,500,000. The estimated useful life of the franchise is 10 years. It is the company's policy to amortize to the nearest month. a. How much is the amortization expense for the year 2021? b. How much is the franchise fee expense for the year 2021?
ABC Company provides extended service contracts on equipment sold through major retailers. The standard contract is for three years. During 2021, ABC Company provided 2,000 such warranty contracts at an average price of P810 each. Related to these contracts, the company spent P200,000 servicing the contracts during the current year and expects to spend P600,00 more in the future. The net profit for 2021 related to the extended service contract is?
On April 1, 2020, Vancouver Company purchased from Sunbucks Company (franchisor), a franchise to operate a 24-hours cafe at Eastwood for P3,125,000. In addition, the franchise contract stipulates that Vancouver shall pay Sunbucks Company 5% of its sales exceeding P5,000,000, payable at the end of the month following the end of every quarter. For the nine months ended December 31, 2020, Vancouver Company's sales amounted to P8,500,000. Vancouver estimates that the useful life of the franchise is 10 years. It is the company's policy to amortize to the nearest month.How much is Vancouver Company's amortization expense and franchise fee expense for the year 2020?
ABC Company sells equipment service contracts that cover 2-year period. The sales price of each contract is P 5,000. ABC past experience shows that of the total pesos spent for repairs in service contracts, 40% is incurred evenly during the first contract year and 60% evenly during the second contract year. ABC sold 1,000 contracts evenly throughout 2018 and 800 evenly throughout 2019. In its December 31,2018 statement of financial position, what amount should ABC report as unearned revenue?
ABC Co. sells equipment service contracts that cover a two-year period. The sales price of each contract is P600. ABC's past experience is that, of the total pesos spent for repairs on service contracts, 40% is incurred evenly during the first contract year and 60% evenly during the second contract year. ABC sold 1,000 contracts evenly throughout 2020. In its December 31, 2020, balance sheet, what amount should ABC report as deferred service contract revenue? O 600,000 O 480,000 O None of these O 520,000
In August 2021, Commonlo Corp. commits to selling 100 of its merchandise to M&H Co. for P30,000 (P300 per product). The merchandise is to be delivered to M&H over the next 6 months. After 60 merchandises were delivered, the contract is modified and Commonlo promises to deliver 80 more products for an additional P21,600 (P270 per station). At year-end, Commonlo delivered an additional 90 products. All sales are cash on delivery. Assume that the additional term is a prospective modification to the original contract How much revenue will be recognized on the contract for the year 2021? Next « Previous
Brilliant Company sold a franchise to sell its products for P5,000,000 on January 1, 2021. The initial fee is payable P500,000 upon signing of the contract and the balance in 5 equal installments every December 31, evidenced by a 12% promissory note. The agreement provides that the franchisor will assist in the location of site, supervision of the building construction, project study or market survey, assistance in the acquisition of facilities, training and management of personnel, quality control, advertising and promotion. It was also agreed that the franchisee will pay a royalty fee equal to 5% of its average sales every calendar year. The franchise outlet was opened on May 1, 2021 and the average monthly sales of the franchisee is P100,000. The franchisor has incurred P1,500,000 related to the services required by the contract. 1. How much is the Initial Franchise Fee Revenue to be recognized in 2021? 2. How much is the Continuing Franchise Fee Revenue to be recognized in 2021? 3.…
Commando Corp. agrees to sell 100 of its products to M&H Co. for P30,000 in August 2021. (P300 per product). The goods will be delivered to M&H over the following six months. The contract is updated after 60 merchandises are supplied, and Common offers to provide 80 more things for an extra P21,600 (P270 per station). Commonlo provided an extra 90 goods at the end of the year. All sales are made in cash upon delivery. Consider that the added term is a potential change to the original contract. That however much income will be recognised under the contract in 2021?
Magenta Company purchased a machine from Pink Corporation on October 31, 2021. In payment for the $288,000 purchase, Magenta issued a one-year installment note to be paid in equal monthly payments of $25,588 at the end of each month. The payments include interest at the rate of 12%. The amount of interest expense that Magenta will report in its income statement for the year ended December 31, 2021, is: A. $2,559. B. $2,880. C. $5,533. D. $5,760.
On July 01, 2021, Emerald Corporation sold a set of washing machine and a dryer for a total contract price of P200,000. The stand-alone selling prices of the washing machine and the dryer if sold separately are: 150,000 and 70,000, respectively. A 20% down payment was made and the balance is payable in six (6) equal installment payments of P28,564, inclusive of 2% interest, payable quarterly starting September 30 and December 31, 2021. How much is the total amount of interest earned in 2021?