Advanced Accounting Review / Introduction / 1st Final Quiz Continuation: Franchise
Started on Saturday, November 24, 2018, 10:52 AM
State Finished
Completed on Saturday, November 24, 2018, 10:57 AM
Time taken 5 mins 50 secs
Grade 10.00 out of 10.00 (100%)
Question 1
Correct Mark 1.00 out of 1.00
Which of the following should be expensed as incurred by the franchisee
for a franchise with an estimated useful life of 10 years?
Select one or more:
a. Legal fees paid to the franchisee’s lawyers to obtain the franchise.
b. Periodic payments to a company , other than the franchisor, for that company’s
franchise.
c. Periodic payments to the franchisor based on the franchisee’s revenues.
d. Amount paid to the franchisor for the franchise.
Your answer is correct.
The correct answer is: Periodic payments to the franchisor based on the franchisee’s
revenues.
Question 2
Correct Mark 1.00 out of 1.00
On July 1, 2009 Hart Corp. signed an agreement to operate as franchisee
of Ace Printers for an initial franchise fee of P1,200,000. On the same
date, Hart paid P400,000 and agreed to pay the balance in four equal
annual installments of P200,000, beginning July 1, 2010.
The down payment is not refundable and no future services are required
of the franchisor. Hart can borrow at 14% for a loan of this type. Present
and future value factors are as follows:
Present Value of P1 at 14% for 4
periods 0.59
Present value of an annuity of P1 at 14% for 4 periods 2.91
Future amount of P1 at 14% for 4 periods 1.69
At what amount should Hart record the franchise at the date of
acquisition?
Select one or more:
a. 738,000
b. 1,200,000
c. 518,000
d. 982,000
Your answer is correct.
The correct answer is: 982,000
Question 3
Correct Mark 1.00 out of 1.00
Mark Co. bought a franchise from Fred Co. on January 1, 2009 for
P204,000. An independent consultant retained by Mark estimates that the
remaining useful life of the franchise was 50 years. Its unamortized cost
on Fred’s books at January 1, 2009 was P68,000. Mark has decided to
use franchise inde nitely. What amount should be amortized for the year
ended December 31, 2009?
Select one or more:
a. 4,080
b. 4,000
c. 0
d. 5,100
Your answer is correct.
The correct answer is: 0
Question 4
Correct Mark 1.00 out of 1.00
Fish Ball Co. charges P90,000 for a franchise, with P18,000 paid when the
agreement is signed and the balance in four annual payments. The
present value of annual payments, discounted at 9% is P58,315. The
franchise has the right to purchase P20,000 of equipment for P16,000. If
the collectability of the payments is reasonably assured and substantial
performance by Fish Ball has occurred, what is the amount of revenue
from franchise fee that should be recognized?
Select one or more:
a. 72,315
b. 72,000
c. 90,000
d. 76,315
Your answer is correct.
The correct answer is: 72,315
Question 5
Correct Mark 1.00 out of 1.00
Andok Manok Corp., awarded its franchise to Chicken House for a total
fee of P100,000. Of the said amount P50,000 was payable upon the
signing of the agreement and the balance in two equal annual payments.
The contract provided that in the event the rst year would result in an
operating loss, the franchising agreement may be cancelled without need
for returning any portion of the franchise fee already paid nor the payment
of any balance still unpaid. The entry to record the granting of franchise to
Chicken House will be:
Select one or more:
a. Cash 50,000
Notes Receivable 50,000
Unearned franchise fee 50,000
Franchise fee revenue 50,000
b. Cash 50,000
Notes Receivable 50,000
Unearned franchise fee 100,000
c. No entry
d. Cash 50,000
Notes Receivable 50,000
Franchise fee revenue 100,000
Your answer is correct.
The correct answer is: Cash 50,000
Notes Receivable 50,000
Unearned franchise fee 50,000
Franchise fee revenue 50,000
Question 6
Correct Mark 1.00 out of 1.00
On January 1, 2010 Browns Co. entered into a franchise agreement with a
company allowing that company to do business under Brown’s name.
Brown’s had performed substantially all required services on January 1,
2010, and the franchise paid initial franchise fee of P70,000 in full on that
date. The franchise agreement speci es that the franchisee must pay a
continuing franchise fee of P6,000 annually, of which 20% must be spent
on advertising by Browns.
What journal entry should Browns make on January 1, 2010 to record
receipt of the initial franchise and continuing franchise fee for 2010?
Select one or more:
a. Cash 76,000
Franchise fee revenue 70,000
Revenue from continuing franchise fee 6,000
b. Cash 76,000
Unearned franchise fee 76,000
c. Cash 76,000
Prepaid advertising 1,200
Franchise fee revenue 70,000
Revenue from continuing franchise fee 6,000
Unearned revenue fee 1,200
d. Cash 76,000
Franchise fee revenue 70,000
Revenue from continuing franchise fee 4,800
Unearned franchise fee 1,200
Your answer is correct.
The correct answer is: Cash 76,000
Franchise fee revenue 70,000
Revenue from continuing franchise fee 4,800
Unearned franchise fee 1,200
Question 7
Correct Mark 1.00 out of 1.00
Mark Co. bought franchise from Fred Co. on January 1, 2009 for
P204,000. An independent consultant retained by Mark estimated that the
remaining useful life of the franchise was 50 years. Its unamortized cost
on Fred’s books at January 1, 2009 was P68,000. Mark has decided to
use the franchise inde nitely. What amount should be amortized for the
year ended December 31, 2009?
Select one or more:
a. 4,000
b. 4,080
c. 0
d. 5,100
Your answer is correct.
The correct answer is: 0
Question 8
Correct Mark 1.00 out of 1.00
On November 1, 2009, a franchise bought a franchise from Max Turkey
for a sales price of P5,000,000 to sell Max Turkey’s products for a period
of 20 years. Their agreement provides that P500,000 will be in advance
and the balance in 5 equal annual installments, evidenced by a 9%
promissory note; and Max Turkey will be responsible in making the
feasibility study of the project and six months training of the franchise’s
staff and employees. The present value factors for the 9% rate as follows:
Present value of P1 for 5
periods 0.650
Present value of an annuity of P1 for 5 periods
3.890
Present value of an annuity of P1 for 5 periods (in advance)
4.240
Assuming collection of the note is reasonably assured, what is the
amount of franchise revenue should Max Turkey recognize for the year
ended December 31, 2009?
Select one or more:
a. 4,001,000
b. 4,316,000
c. 1,085,000
d. 0
Your answer is correct.
The correct answer is: 0
Question 9
Correct Mark 1.00 out of 1.00
On January 2, 2009, Rafa Co. purchased a franchise with a useful life to
ten years or P50,000. An additional franchise fee of 3% of franchise
operation revenues must be paid each year to the franchisor. Revenues
from franchise operations amounted to P400,000 during 2009. In its
December 31, 2009 balance sheet, what amount should Rafa report as an
intangible asset-franchise?
Select one or more:
a. 50,000
b. 45,000
c. 43,800
d. 33,000
Your answer is correct.
The correct answer is: 45,000
Question 10
Correct Mark 1.00 out of 1.00
On December 31, 2009, Rice Inc. authorized Graf to operate as a
franchisee for an initial franchise fee of P150,000. Of this amount,
P60,000 was received upon signing of the agreement and the balance ,
represented by a note, is due in three annual payment of P30,000 each
beginning December 31, 2010. The present value on December 31, 2009
of the three annual payments appropriately discounted is P72,000.
According to the agreement, the non refundable down payment
represents affair measure of the services already performed by Rice;
however, substantial future service are required of Rice. Collectability of
the note is reasonably certain.
If Rice’s December 31, 2009 balance sheet, unearned franchise fees from
Graf’s franchise should be reports as
Select one or more:
a. 72,000
b. 90,000
c. 100,000
d. 132,000
Your answer is correct.
The correct answer is: 72,000
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