PART III.

FRANCHISE ACCOUNTING
2 Goldilocks Company
Requirements:
1 RECOMMENDED REVENUE RECOGNITION METHOD
Franchise A: Full Accrual Method

Franchise Revenue:
Initial Deposit
PV or Four Payments [4%for 4 periods (P30,000 x 3.62
Franchise Cost
Interest Revenue (P108,897 x 4%)
Income from Franchise A
Franchise B:

Deposit Method

Because of the doubtful collection and only partial comple

No revenue or income would be recognized in 2008 from
However, because the first payment of P70,000 was made
Franchise C:

Installment Method or Cost Recovery Method

Because of the doubtful collection but substantial comple

If the installment sales method is used, gross profit of P84

iods (P30,000 x 3.6299)]

70,000.00
108,897.00

178,897.00
70,000.00

108,897.00

4,356

113,253

d only partial completion, the deposit method should be used.

gnized in 2008 from the franchise fee.
of P70,000 was made, interest revenue of P4,355.88 would be recognized.

t substantial completion, either the installment sales or cost recovery method could be used.
d, gross profit of P843,600* would be recognized in 2008 plus interest revenue of P87,200.

uld be used.
f P87,200.