On January 1, 20x1, Native Co. enters into a contract to grant a franchisee the right...

  

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On January 1, 20x1, Native Co. enters into a contract to grant a franchisee the right to use Native's trade name and sell Native's products for 10 years. In addition, Native also promises to provide the equipment necessary to operate the franchise store. The contract states a fixed consideration of P450,000 and a 5% sales- based royalty. The fixed consideration includes P150,000 payment for the equipment. This reflects the stand-alone selling price of the customary business practice to undertake activities such as analyzing the customer's changing preferences and implementing product improvements, pricing strategies, marketing campaigns equipment. Native Co., as a franchisor, has developed practice to undertake activities such a. customary business and operational efficiencies to support the franchise name. Native delivers the equipment to the customer on February 1, 20x1. The customer commences business operations on March 1, 20x1, at which date the 10-year license period starts to run. The franchisee reports sales of P1,200,000 for the year. Requirements: a. Determine the following: the performance obligations in the contract and how these will be satisfied. i. the transaction price. how the transaction price is allocated. how revenue will be recognized from the contract. ii. ii. iv. b. Provide the journal entries in 20x1. On January 1, 20x1, Native Co. enters into a contract to grant a franchisee the right to use Native's trade name and sell Native's products for 10 years. In addition, Native also promises to provide the equipment necessary to operate the franchise store. The contract states a fixed consideration of P450,000 and a 5% sales- based royalty. The fixed consideration includes P150,000 payment for the equipment. This reflects the stand-alone selling price of the customary business practice to undertake activities such as analyzing the customer's changing preferences and implementing product improvements, pricing strategies, marketing campaigns equipment. Native Co., as a franchisor, has developed practice to undertake activities such a. customary business and operational efficiencies to support the franchise name. Native delivers the equipment to the customer on February 1, 20x1. The customer commences business operations on March 1, 20x1, at which date the 10-year license period starts to run. The franchisee reports sales of P1,200,000 for the year. Requirements: a. Determine the following: the performance obligations in the contract and how these will be satisfied. i. the transaction price. how the transaction price is allocated. how revenue will be recognized from the contract. ii. ii. iv. b. Provide the journal entries in 20x1.

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Ans I There are two performance obligations by Native Co Firstly they have to provide the equipment ... View the full answer