Jalibi Food Corporation enters into franchise agreement on June 1, 2017 with Mr.

Tony Tan Kak

Chong for a package with total fee of P 500,000. The right granted is to operate the business for
4 years. The terms of payment provide that a down payment of P 180,000 shall be paid and
balance is payable in 4 years. Mr. Chonga issued an 8% non-interest bearing note for the
balance. (PV of ordinary annuity 3.31212). The agreement provides for a royalty payment of 2%
of the monthly gross sales. The total fee of P500,000 includes the following with their stand-
alone prices:

.................. 100,000

All the services inclusive in the package were performed as of October 30, 2017 while the
equipment was installed only on January 1, 2018. The franchise commenced operations on
January 15, 2018. The total gross sales in 2018 amounted to P 1,500,000.

1. If Jalibi Food Corpration satisfied the obligation at point in time as when Mr. Chonga has
obtained control of the rights, how much of the total contract price is allocated to the
transfer of rights, sale of equipment and services? (ANSWER = P278,106; P111,242;
P55,621)
2. If Jalibi Food Corpration satisfied the obligation at point in time as when Mr. Chonga has
obtained control of the rights, how much revenue shall be recognized in December 31,
2017? (ANSWER = 67,986)
3. If Jalibi Food Corpration satisfied the obligation at point in time as when Mr. Chonga has
obtained control of the rights, how much revenue shall be recognized in December 31,
2018? (ANWER = 437,801.85)
4. If Jalibi Food Corpration satisfied the obligation and provides access to the rights and
must continue (recognized over time) to perform updates and services, how much
revenue shall be recognized in December 31, 2017? (ANSWER = 64,986)
5. If Jalibi Food Corpration satisfied the obligation and provides access to the rights and
must continue (recognized over time) to perform updates and services, how much
revenue shall be recognized in December 31, 2018? (ANSWER = 229,222)