1.Examination of the reciprocal accounts between Coco Home Office and the Melon Branch shows the following: a. 10,000 advertising expense of another branch was erroneously charged by the Home Office to Melon Branch. b. Melon recorded shipments of merchandise from Home Office amounting to 75,000 twice. c. Home Office recorded cash transfer of 65,700 from Melon Branch as coming from Cebu Branch. d. Transfer of equipment from Home Office amounting to 53,000 was not recorded by the branch. e. Melon recorded a debit memo from Home Office of 5,540 as 5,450.

How much is the net adjustments to (a) Melon Branch Current Account and to the (b) Home Office Current Account?

2.On January 1, 2020, Jealous Corp. granted a franchise to Mr. Greed with an initial franchise fee of P5,000,000. The terms of payment were P750,000 was considered as down payment and the balance was shouldered by a non-interest bearing note payable in five equal annual installments starting at the end of the year, December 31, 20x20. The prevailing rate for a similar notes was 10%. (PV factor for 5 periods is 3.79079). By December 31, 2020, the franchise generated gross sales amounting to P2,500,000. The franchise agreement will expire on December 31, 2024. As part of the franchise agreement, the following were also agreed upon: a. Jealous will allow Greed to use its trade name until the expiration of the contract and will have a stand-alone selling price of P500,000. b. Jealous will install and deliver the store equipment and will have a stand-alone selling price of P300,000. c. Jealous will deliver 10,000 units of merchandise and will have a stand-alone selling price of P200,000. d. Continuing fee of 15% based on gross sales. As of December 31, 2020, Jealous had installed and delivered the equipment, but only 3,500 units of merchandise were delivered.

Under PFRS 15, what is the revenue from initial franchise fees at December 31, 2020?

3.At the beginning of the year, Mr. TAKO got the franchise of YAKI, a known restaurant of upscale patronage. The franchise agreement required a P5,000,000 franchise fee, P1,000,000 is payable upon signing of the franchise and the balance in four annual installments starting the end of the current year. Using a 12% present value discount rate, the four installments would approximate P3,037,350. The fees once paid are not refundable. The franchise may be cancelled subject to provisions of the agreement. Should there be unpaid franchise fee attributed to the balance of the main fee (P5,000,000), the same would become due and demandable upon cancellation. Further, the franchiser is entitled a 5% fee on gross sales payable monthly within the first ten days of the following month. The Credit Investigation Bureau rated TAKO a 1+ credit rating. The balance of the franchise fee was guaranteed by a commercial bank. The first year of operations yielded gross sales of P90 million.

What is the amount YAKI's earned franchise fees for the first year of operations?

4.On January 1, 2021, Love entered into a consignment agreement with Peace. The consignment arrangement provided that Peace is entitled 5% commission based on sales. Love manufactured 100 boxes of product X at manufacturing cost of P200,000. On July 1, 20x1, Love shipped through a common carrier 30 boxes of consigned goods to Peace. The common carries collected the freight amounting to P3,000 from Peace. For the year ended December 31, 2021, Peace sold for cash 20 boxes of consigned goods to final consumers at Peace's predetermined price of P3,000 per box.

What is the net income to be reported by Peace for the period ended December 31, 2021?

5.Under PFRS 15, when shall a franchisor recognize revenue from its initial franchise fee also known as upfront fee?

6.Under PFRS 15, what account shall be presented by the entity in its statement of financial position regarding its contracts with customers where a customer has paid an amount of consideration prior to the entity's satisfaction of performance obligation by transferring the related good or service to the customer?

Answer rating: 100% (QA)

1 Net Adjustments a Melon Branch Current Account Advertising expense erroneously charged 10000 Shipments of merchandise recorded twice 75000 Cash tran... View the full answer