Dominador's Pizza Inc. enters into a franchise agreement on December 31, 20x7 giving Doming Corp. the right to operate as a franchisee of Dominador's Pizza for 5 years. Dominador charges Doming an initial franchise fee of P475,000 for the right to operate as a franchisee. Of this amount, P190,000 is payable when Doming Corp. signs the agreement, and the balance is payable in five annual payments of P57,000 each on December 31

 Consider the following for allocation of the transaction price at December 31,

20x7.

 Rights to the trade name, market area, technical and

proprietary know-how……………………………….…......P190,000.00

Services-training,e tc………………………………………...94,591.50

Machinery and equipment, etc. (costing, P95,000)……..133,000.00

Total transaction price…………………………………….. P417,591.50

 The credit rating of Doming indicates that money can be borrowed at 8%. The present value of an ordinary annuity of five annual receipts of P57,000 each discounted at 8% is P227,591.50. The discount of P57,408.50 represents the interest revenue to be accrued by Dominador 's Pizza Inc. over the payment period.

 Training is completed in January 20x8, the equipment is installed in January 20x8, and Doming holds a grand opening on February 4, 20x8. On February 4, 20x8, the franchise opens.

 Doming also promises to pay ongoing royalty payments of 1% of its annual sales products from Dominador's at its current stand-alone selling prices at the time of purchase. (payable every January 31 of the following year) and is obliged to purchase

How much revenue (franchise revenue, service revenue, and sales revenue -machinery and equipment) be recognized on December 31, 20x7? show computation

a. Zero.

b. P 94,591.50

c. P133,000.00

d. P190,000.00

 How much revenue (franchise revenue, service revenue, and sales revenue-machinery and equipment) be recognized on February 4, 20x83? show compputation

a. P 94,591.50

b. P133,000.00

c. P190,000.00

d. P417,591.50

How much continuing franchise revenue be recognized on December 31 20x8, assuming the sales of P4,987,500 were generated for the first year of

operations?

a. Zero.

b. P48,875.00

c. P190,000.00

d. P417,591.50

Answer rating: 100% (QA)

1 How much revenue franchise revenue service revenue and sales revenue machinery and equipment be re... View the full answer