Академический Документы
Профессиональный Документы
Культура Документы
J. VILLENA, CPA
BSA3A Page 1 of 3
FRANCHISE ACCOUNTING
J. VILLENA, CPA
The management of AB has estimated that they can borrow loan at the rate
of 12% (PV factor 3.04). The franchisee commenced its operations on July 31,
2016. A continuing franchise fee equal to 5% of its monthly gross sales of
950,000 for the month. How much is the net income to be reported on August
31, 2016?
PROBLEM 5: On August 1, 2016, SAM Inc. entered into a franchise
agreement with SMITH Franchisee. The initial franchise fee agreed upon is
P246,900 of which 46,900 is payable upon signing and the balance to be
covered by a non-interest bearing note payable in four equal annual
installments. The down payment is refundable within 95 days. SMITH Inc. has
a high credit rating; thus, collection of the note is reasonably assured. Out of
pocket cost of 125, 331 and 12,345 were incurred for direct expenses and
indirect expenses respectively. Prevailing market rate is 9%. PV factor is
3.2397.
How much revenue will the franchisor recognized on October 31, 2016?
BSA3A Page 2 of 3
FRANCHISE ACCOUNTING
J. VILLENA, CPA
31, 2012. The present value on December 31,2011 of the three annual
paymnets appropriately discounted is 36,000. According to the agreement,
the non-refundable down paymnet represents a fair measure of the services
already performed by RR, however, substantial future services are required of
RR. Collectibility of the note is reasonably certain. On December 31, 2011, RR
should record unearned franchise fees in respect of the Fay Franchise of?
BSA3A Page 3 of 3