ADVANCED ACCOUNTING PART 1

SEATWORK - FRANCHISE ACCOUNTING

FRANCHISE REVENUE
Franchise A - Under Accrued Method
Downpayment
Add: Present value 600,000 * 3.63
Franchise B - Under Deposit Method
Franchise C - Under Installment Method
Downpayment
First installment payment 600,000.00
Less: Interest (2,177,937 * 4%) 87,117.48
TOTAL FRANCHISE REVENUE

Note: Mr. Dayag suggested to answer P0 for installment method - with that the answer is

REALIZED GROSS PROFIT

Franchise A - Under Accrued Method
Downpayment
Add: Present value
Franchise revenue
Less: Franchise cost
Franchise B - Under Deposit Method
Franchise C - Installment Method
Collections
Downpayment 1,400,000.00
Installment payment 512,882.52
Multiply by Gross profit rate
TOTAL REALIZED GROSS PROFIT

Computation of Gross Profit Rate - Franchise C

Downpayment
Present value
Franchise revenue
Less: Franchise cost
Gross Profit

Gross Profit Rate

INCOME FROM FRANCHISE

Franchise A - Under Accrued Method
Downpayment
 Add: Present value
Franchise revenue
Less: Franchise cost
Gross profit
Add: Interest (2,177,937 * 4%)
Franchise B - Under Deposit Method
Only the interest
Franchise C - Installment Method
Collections
Multiply by Gross profit rate
Realized gross profit
Add: Interest
TOTAL INCOME FROM FRANCHISE

Note: Mr. Dayag suggested not to include interest income for Franchisee B due to no substantial services were performed
Dayag suggested answer 3,195,788.48

UNEARNED REVENUES
Franchise A - Under Accrued Method
Unearned interest income 222,063.00
Franchise B - Deposit Method
Unearned franchise revenue
Unearned interest income
Franchise C - Installment Method
Uncollected
Unearned interest income
TOTAL UNEARNED REVENUES

Other Author suggested answer:

Franchise C - Installment Method
Deferred gross profit
Unearned interest income
TOTAL UNEARNED REVENUES

Date Payment Interest Principal

31-Dec-12 600000 87,117.48 512,882.52

30-Apr-12 600000 66,602.18 533,397.82
30-Aug-12 600000 45,266.27 554,733.73
31-Dec-12 600000 23,076.92 576,923.08
 Total

1,400,000.00
2,177,937.00 3,577,937.00
-

1,400,000.00

512,882.52 1,912,883.00
5,490,820.00

3,577,937.00

Total

1,400,000.00
2,177,937.00
3,577,937.00
1,400,000.00 2,177,937.00
-

1,912,882.52
44.10% 843,581.19
3,021,518.19

1,400,000.00
2,177,937.00
3,577,937.00
2,000,000.00
1,577,937.00

44.10%

Total
1,400,000.00
 2,177,937.00
3,577,937.00
1,400,000.00
2,177,937.00
87,117.48 2,265,054.48

87,117.48
1,912,883.00
44.10%
843,617.00
87,117.48 930,734.00
3,282,905.96

o substantial services were performed.

87,117.48 134,945.52

3,577,937.00
134,945.52 3,712,882.52

1,665,054.64
134,945.36 1,800,000.00
5,647,828.04

734,355.81
134,945.52 869,301.33
4,717,129.37

Present Value
2,177,937.00
1,665,054.48
1,131,656.66
576,922.93
(0.16)