During 2021, Entity K purchased a franchise for P960,000. In addition, 5% of the revenue from the franchise must be paid to the franchisor. Revenue from the franchise for 2021 was P5,000,000. Entity K estimates the useful life of the franchise to be 10 years and takes full year's amortization in the year of purchase. The total franchise-related expenses is *
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- On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring payments of 10,000 at the beginning of each year. The machine cost 40,000 and has a useful life of 8 years with no residual value. Kerns implicit interest rate is 10%, and present value factors are as follows: Present value for an annuity due of 1 at 10% for 6 periods4.791 Present value for an annuity due of 1 at 10% for 8 periods5.868 Kern appropriately recorded the lease as a sales-type lease. At the inception of the lease, the Lease Receivable account balance should be: a. 60,000 b. 58,680 c. 48,000 d. 47,910On January 1, 2021, Dreamlover Corporation purchased equipment from Daydream Company for P3,600,000. Term of payments includes issuing a 5-year noninterest-bearing note payable equally every end of the year. The effective interest rate is 15%. The entity used 2 decimal places for the PVF. Requirements: How much is the initial cost of the equipment?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?
- Road Ltd started construction of equipment, a qualifying asset in terms of IAS23 Borrowing costs, for its own use in 2020. Road Ltd finances the construction of the equipment through a general loan that bears interest at 10% per year, compounded annually. No repayments were made on the loan during 2021. R500 000 was incurred on the project during 2020. The following costs were incurred evenly (paid evenly during each month) during the construction of the equipment in 2021: 1 January 2021 - 31 May 2021: R50 000 per month 1 June 2021 - 31 December 2021: R40 000 per month Required Calculate the amount of borrowing costs that should be capitalised to the cost of the equipment for the year ended 31 December 2021.Garnet Corporation enters into a 4-year construction contract worth $100 million with Gold company on January 1, 2022. At the end of 2022, construction costs totaled $20 million and Garnet estimates $60 million of construction costs remain. If Garnet uses the percent of completion method to determine revenues, how much revenue will Garnet recognize in 2022 related to the construction contract?ABC Limited purchased 6 computers on the 30 December 2022 for $600,000. Initial Allowance is 25% and annual allowance is 20%. What is the capital allowance claimable for 2022?
- Hogg Company purchased a machine from Chump Corporation on October 31, 2020. In payment for the $570,000 purchase, Hogg issued a one-year installment note to be paid in equal monthly payments of $50,664 at the end of each month. The payments include interest at the rate of 12%. The amount of interest expense that Hogg will report in its income statement for the year ended December 31, 2020, is: O $10,950 O $5,064 O $5,700 $11,520Rover Corporation pays a franchise fee of P40 Million to enable to sell Luna's products for the next 20 years. The company is required to pay an annual payment of P80,000. What is the amount of annual amortization?On January 1, 2021, the Montgomery Company agreed to purchase a building by making six payments. The first three are to be $26,000 each, and will be paid on December 31, 2021, 2022, and 2023. The last three are to be $41,000 each and will be paid on December 31, 2024, 2025, and 2026. Montgomery borrowed other money at a 12% annual rate. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required:1. At what amount should Montgomery record the note payable and corresponding cost of the building on January 1, 2021?2. How much interest expense on this note will Montgomery recognize in 2021?
- On January 1, 2021, the Montgomery Company agreed to purchase a building by making six payments. The first three are to be $25,000 each, and will be paid on December 31, 2021, 2022, and 2023. The last three are to be $40,000 each and will be paid on December 31, 2024, 2025, and 2026. Montgomery borrowed other money at a 10% annual rate.Required:1. At what amount should Montgomery record the note payable and corresponding cost of the building on January 1, 2021?2. How much interest expense on this note will Montgomery recognize in 2021?Abhijit Co. leased equipment from Barua Corp. on July 1, 2018, for an 8-year period expiring June 30, 2026. Equal annual payments on July 1 of each year are $120,000. The first payment was made on July 1, 2018. The rate of interest contemplated by Abhijit and Barua is 10%. The cash selling price of the equipment is $704,000, and the cost of the equipment on Barua’s accounting records is $560,000. The lease is appropriately recorded as a sales-type lease. What is the amount of selling profit on the sale and interest revenue that Barua will record for the year ended December 31, 2018?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?