407 Accounting for Franchise Operations - Franchisor 10. Water Co. enters into the following three franchise...

 

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407 Accounting for Franchise Operations - Franchisor 10. Water Co. enters into the following three franchise agreements on July 1, 20x1: Probability of Cash Present collection down Direct value of costs payment Reasonably assured note incurred 20,000 Uncertain 60,747 32,000 20,000 Significantly uncertain 48,037 25,000 C 20,000 33,801 21,520 Totals 60,000 142,585 78,520 Additional information: ● The down payments are non-refundable and are due at contract inception. . The discount rate on all the notes is 12% and the first installment payments are due on July 1, 20x2. ● At contract inception, Water expects to provide Franchisee B a price concession and concludes that it is probable that Franchisee B will pay half of the note. The adjusted present value of the note is P24,018. The discount rate is 12%. ● The nature of the licenses is to provide the customers the 'right to use' Water's intellectual property as it exists at grant date. Water transfers the licenses to the customers on July 1, 20x1. How much is the total profit recognized from the three contracts in 20x1? c. 78,312 a. 74,879 d. 80,921 b. 76,982 PROBLEM 5: CLASSROOM ACTIVITY INSTRUCTIONS: 1. Find a study partner. 2. Imagine that you and your study partner are accountants. 3. Read the contract below and answer the succeed requirement. Franchisee A B 407 Accounting for Franchise Operations - Franchisor 10. Water Co. enters into the following three franchise agreements on July 1, 20x1: Probability of Cash Present collection down Direct value of costs payment Reasonably assured note incurred 20,000 Uncertain 60,747 32,000 20,000 Significantly uncertain 48,037 25,000 C 20,000 33,801 21,520 Totals 60,000 142,585 78,520 Additional information: ● The down payments are non-refundable and are due at contract inception. . The discount rate on all the notes is 12% and the first installment payments are due on July 1, 20x2. ● At contract inception, Water expects to provide Franchisee B a price concession and concludes that it is probable that Franchisee B will pay half of the note. The adjusted present value of the note is P24,018. The discount rate is 12%. ● The nature of the licenses is to provide the customers the 'right to use' Water's intellectual property as it exists at grant date. Water transfers the licenses to the customers on July 1, 20x1. How much is the total profit recognized from the three contracts in 20x1? c. 78,312 a. 74,879 d. 80,921 b. 76,982 PROBLEM 5: CLASSROOM ACTIVITY INSTRUCTIONS: 1. Find a study partner. 2. Imagine that you and your study partner are accountants. 3. Read the contract below and answer the succeed requirement. Franchisee A B

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Step 1 The unearned financial gain is delayed so recognized as financ... View the full answer