Cha

pte
r9
ProblemI
1. J ol
l
ibe
ehassubs
tant
ial
l
yperf
ormedallma
teri
als
erv
ice
s,ther
efundperi
odha
sex
pir
ed,
andt
hec
oll
ect
ibi
l
ity
oft
henot
eisrea
sonabl
yas
sured.
Jol
l
ibeerec
ogni
zesrev
enueasfol
lows
:
Cas
h……….. 240,
000
Not
esre
cei
vabl
e……………. 600,
000
Fra
nchi
serev
enu
e…………………….
. 840,
000
2. Ther e
fund peri
od hasexpi
reda
nd t
hec ol
le
cti
bil
it
yofthenot
ei srea
sonabl
yas
sur
ed,butJol
li
bee
hasnots ubs
tant
ial
l
ype rf
ormedal
lmate
rialser
vic
es.J
oll
ibe
edoesnotr
ecog
nizer
eve
nue,buti
nst
ead
rec
ogni
zesali
abil
i
tya sf
oll
ows:
Cas
h……….
. 240,
000
Not
esr
ece
ivabl
e……………. 600,
000
Une
arnedfr
anchi
ser
eve
nue
…………………….
. 840,
000
Franchis
orwil
lre
cogni
zetheunea
rnedfra
nchi
sefe
esa
srev
enuewhe
nitha
spe
rfor
meda
llma
ter
ials
erv
ice
s,
theadjust
inge
ntryt
orecordthere
venuet
henwoul
dbe:
Un
earne
dfran
chi
ser
even
ue…………………….
.
. 840,
000
Fr
anchi
ser
eve
nue
….……. 840,
000
3.J
oll
ibeeha
ss ubs
tant
ial
lyper
for
me dalls
erv
ice
sa nd t
hecoll
ect
ibil
i
ty oft
he noteisrea
sona
blyass
ured,
buttherefund period hasnotex
pire
d.Joll
ibeedoesnotrecogni
zereve
nue,buti
nst
eadrec
ogni
zesa
li
abil
i
tyasfoll
ows:
Cas
h……….
. 240,
000
Not
esr
ece
ivabl
e……………. 600,
000
Une
arnedfr
anchi
ser
eve
nue
…………………….
. 840,
000
Thefr
a nc
his
orwil
lre
cogni
zetheunea
rned fr
anc
his
efe
esa
sre
venuewhe
nther
efundpe
riode
xpi
res
,the
adj
ust
ingent
rytorec
ordther
e v
enuet
henwoul
dbe:
Un
earne
dfran
chi
ser
even
ue…………………….
.
. 840,
000
Fr
anchi
ser
eve
nue
….……………………………….. 840,
000
4. Jol
li
beehassubst
anti
all
ype r
for
meda l
lse r
vic
e sandtherefundperi
odha sexpi
red,butthec ol
lec
tibi
li
tyof
thenotei
snotreas
onablyass
ured.
Jol
li
be erecognize
sreve
nuebyt heins
tal
lmentorcostrecover
yme t
hod.I
f
weassumethatJ
oll
ibeeuse
stheins
tal
l
me ntme thod,i
tre
cognizesr
evenueofP240,000a sfol
lows:
Cas
h……….. 240,
000
Not
esre
cei
vabl
e……………. 600,
000
Fra
nchi
serev
enu
e…………………….
. 240,
000
Unear
nedfr
anchi
ser
eve
nue
…………… 600,
000
Thefranc
his
orisus
ingt
hei
nst
all
mentmethod,i
tre
cognize
stheune
arnedfr
anchi
sefeesasre
venuei
nthe
amountofP120,
000eac
hye
ara si
trec
eiv
escashas
sumingthe
rei
snoc os
toffr
anchi
se,t
heentr
ywouldbe
asf
oll
ows:
Un
earne
dfran
chi
ser
eve
nue
…………… 1
20,
000
Fr
anchi
ser
eve
nue
…………………….
. 1
20,
000
Thi
srev
enuer e
cogni
ti
onma ybet
r ueonl
yintheev
entthe
rei
snocos
toffr
anchi
seatal
l
.Ontheot
herhand,
itmaybesome whatmis
lea
dings
inceundert
heinst
all
ments
ale
smet
hod;gr
ossprof
iti
sea
rnedorrea
li
zed
thr
ucoll
ect
ions.
5.Ther e
fund pe r
iod hasexpired,butJ oll
ibeeha snots ubsta
nti
all
ype r
formeda l
lse
rvic
esand thereisno
basisfore s
ti
ma t
ingthecoll
ecti
bil
ityofthenot e
.J oll
ibeedoesnotrec
ognizethenoteasa nass
et.I
nst
ead, i
t
usesaf orm·ofthedeposi
tme thod.Fore xample,s upposeJol
l
ibeehasde v
elopedane nti
rel
yne w product
whoses ucc
essisuncert
ainand t hefr
anchis
e ewil
lpa ythenotef r
om thec as
hfl
owsf r
om thesaleoft he
produc t,i
fany.Jol
l
ibeerecordstheini
ti
altransact
iona sfol
l
ows:

Ca
sh……….
. 240,
000
 Un
ear
nedf
ran
chi
ser
eve
nue
…………………….
. 240,
000
Thefranc
his
orma yrec
ogni
zet heunearne
df ranchi
sefe
esasre
venueunde
rt heacc
rualmet
hod i
nthe
normalmanneratthecompl
eti
on oftheserv
ice
st obeperf
orme
d( i
fcol
l
ect
ibi
l
ityi
sreas
onabl
yass
ured)
,
theadj
ust
ingent
rytorec
ordtherev
enuethenwouldbe:
Un
earne
dfran
chi
ser
even
ue…………………….
.
. 240,
000
Fr
anchi
ser
eve
nue
….……………………………….. 240,
000
Alt
ernati
vel
y,i
tma yrecog
nizer
eve
nueunde
rthei
nst
all
mentme
thodi
fitha
snoba
sisf
ore
sti
mat
ingt
he
col
lect
ibi
li
tyofthenot
e.
6. Nowa ssume thatJ oll
i
beehase ar
ned onl
yP360, 000 fr
om prov
iding ini
ti
alserv
ice
s,wi
tht hebal
ance
bei
ngadownpa yme ntforconti
nui
ngserv
ice
s.I
ftheref
undperi
odha sexpir
eda ndthecol
le
cti
bil
it
yofthe
noteisreas
onabl
ya ssur
ed,Jol
li
beerec
ogni
zesreve
nueofP360,
000a sfol
lows:
Cash……….. 240,000
Notesrec
eiv
able
……………. 600,000
Fra
n c
his
ereven
ue ……………………. . 360,
000
Unearne
dfranchi
serev
enue………….. 480,
000
Thef r
anchi
sorrecogni
zest
heunear
nedf
ranc
his
ere
venueofP480,
000asr
eve
nuewhe
nitpe
rfor
mst
he
cont
inuings
ervi
ces
, t
headj
ust
inge
ntr
ytor
ecor
dther
evenuet
henwoul
dbe
:
Un
earne
dfran
chi
ser
even
ue…………………….
.
. 480,
000
Fr
anchi
ser
eve
nue
….……………………………….. 480,
000
Inallthe
sec ase
sex c
e ptthef i
fth,thef ranchi
soraccountsforthecoll
ec t
ionofintere
standprincipa
lonthe
noterecei
vableintheus ualma nner. Inthef i
ft
hsit
uati
on,itdoesnotr ecognizethenoteandrev e
nueunti
la
fut
uree ventoccurs.Ina ddition,t hef ranchi
sora cc
ountsf oritscostsint hes amewa ya sitsreve
nue
rec
og ni
ti
on.Tha tis,ifi tde f
e rsre venue,thenitde fe
rst her el
ate
dc ostofg oodssold.Then,whenit
rec
og ni
zesr e
venue,itma tchest hec ostofg oodssol
da gainsttherevenues.Thefranchi
seeaccount
sforit
s
payme nt
sa sanint
ang i
blea ss
et.
S
ometi
mesthefranc
hisorc
oll
ect
stheini
tia
lfr
anc
hisefe
ef a
rinadvanc
eofperf
ormi
ngitss
erv
ice
s.Atot
her
t
ime
scoll
ect
ionofpartoft
heini
ti
alf
ranchi
sef
eeisdef
erre
dunti
lthefr
anc
his
eisope
rat
ings
ucces
sful
l
y.
ProblemI I
1.
Ca s
h...
.
.
..
.
..
.
..
.
.
..
...
.
.
...
..
.
..
.
..
.
.
..
..
.
. 75,
000
  
Un ear
nedFr a nchi
seFe e.
..
.
..
.
..
.
..
.
.
..
.
..
.. 75,
000
2.
Ca s
h...
.
.
..
.
..
.
..
.
.
..
...
.
.
...
..
.
..
.
..
.
.
..
..
.
. 75,
000
NoteRe c
eiv
a bl
e. .
..
.
..
.
..
..
.
.
..
.
..
.
..
..
.
.
..
.
. 1
20,
000
  
Un ear
nedI .
I.orDi sc
ountonNot eRece
iva
ble 28,
881
  
RevenuefromFr anchis
eFe e.
..
.
..
.
..
.
..
.
..
.
. 1
66,1
19
  
[P{75,
000+( P30,000x3. 0373)]=P11
6,1
19
(TableIVn=4, i=12% )
3.
Ca s
h...
.
.
..
.
..
.
..
.
.
..
...
.
.
...
..
.
..
.
..
.
.
..
..
.
. 75,
000
NoteRe c
eiv
a bl
e. .
..
.
..
.
..
..
.
.
..
.
..
.
..
..
.
.
..
.
. 1
20,
000
  
Un ear
nedI .
I.orDi sc
ountonNot eRece
iva
ble 28,881
  
RevenuefromFr anchis
eFe e.
..
.
..
.
..
.
..
.
..
.
. 75,000
  
Un ear
nedFr a nchi
seFe e.
..
.
..
.
..
.
..
.
.
..
.
..
.. 91,1
19
Probl
emI I
I
1.Ifthe
reisarea
son
a bl
eexpe
cta
tiont
hatthedownpa
yme n
tmayber
efu
nde
dan
dsu
bst
ant
ialf
utu
res
erv
ice
s
r
emaintobeper
formedbyPizza,
Inc
.,t
heentr
yshou
ldbe:
Cas
h……….
. 1
20,
000.
00
Not
esr
ece
ivabl
e……………. 480,
000.
00
Une
arnedint
ere
sti
ncome(orDis
cou
ntonnot
esr
ece
iva
ble
) 80,
583.
20
Une
arnedfr
anchi
serev
enu
e …………………….. 41
9,
416,
80

2.I
fthepr obabi
l
ityofre
fundi
ngth
einit
ialf
ranc
his
efeei
sex
tre
melylow,t
heamountoff
utu
rese
rvi
cestobe
providedtothefra
nchi
seei
smini
ma l
,col
le
cti
bil
i
tyoft
henot
eisre
a s
onabl
yass
ured,a
ndsubs
tan
tial
performa n
cehasoccur
red,
theent
ryshouldbe:
Cas
h……….
. 1
20,
000.
00
Not
esr
ece
iva
ble
……………. 480,
000.
00
 Unea
rnedi
nte
restin
come(
orDi
scou
ntonn
ote
sre
cei
vabl
e) 96,
699.
84
Fr
anchi
ser
evenu
e …………………….
. 503,
300.
16

3. I
fthei
nit
ialdownpaymenti
sn otref
unda
ble
,repr
ese
ntsafa
irmeasur
eofthes
erv
ice
sa l
rea
dypr ov
ided,
wit
ha
s
igni
fi
can
ta mountofse
rvi
cessti
l
ltobeperf
ormedbyt h
efran
chi
sorinf
utu
reper
iods,a
ndc ol
l
ecti
bil
i
tyofthe
not
eisre
asonabl
ya s
sur
ed,t
h eent
ryshou
ldbe:
Cas
h……….. 1
20,
000.
00
Not
esre
cei
vabl
e……………. 480,
000.
00
Unear
nedint
ere
stin
come(orDi
scou
ntonn
ote
sre
cei
vabl
e) 96,
699.84
Fra
nchi
serev
enue…………………….. 1
20,000.00
Unear
nedfr
anchi
serev
enu
e 383,300.1
6

4.I
fth
eini
ti
aldownpaymenti
snotref
undabl
ean
dnofut
urese
rvi
cesarerequi
redbyth
efran
chis
or,bu
tcol
l
ect
ion
ofthen
oteissou
ncert
aint
hatre
cogni
ti
onoft
hen
oteasanass
etisu
n wa
r r
ant
ed,t
heent
ryshoul
dbe:
Ca
sh……….
. 1
20,
000.
00
Fra
nch
iser
eve
nue
…………………….
. 1
20,
000.
00

Wher
ethec ol
l
ect
ionoft
h enot
eisex
tre
melyu
nce
rta
in,
rev
enu
eth
rug
ros
spr
ofi
tisr
ecog
nize
dbyme
ansof
c
ashc
oll
ect
ionusi
ngthecostre
cov
erymeth
od.
5. I
fthei
ni
ti
aldownpaymenti
sref
undabl
eorsu
bst
ant
ialse
rvi
cesar
eyett
obeperf
orme
d,butc
oll
ect
ionoft
he
not
eiss
ouncert
aint
hatr
ecogn
iti
onoft
henotea
sana s
seti
sunwarr
ant
ed,
thee
ntr
yshou
ldbe:
Ca
sh……….
. 1
20,
000
Une
arn
edf
ran
chi
ser
eve
nue
…………………….
. 1
20,
000

Wherethec
oll
ect
ionofth
en ot
eise
xtre
mel
yun
cer
tai
n,r
eve
nuet
hrug
ros
spr
ofi
tisr
ecog
nize
dbyme
ansofc
ash
col
l
ecti
onus
ingthecos
trecove
rymeth
od.
Proble
mI V
1.Ifth
edownpayme
ntisre
fun
dable
,an
dn oserv
ice
shav
ebeenr
ende
reda
tth
eti
met
hea
rra
nge
men
tisma
de,
and
col
le
cti
onont
hen
oteisr
eas
onabl
ycert
ain
,th
ee nt
rys
hou
ldbe:
Cas
h……….
. 1
20,
000.
00
Not
esr
ece
ivabl
e……………. 1
80,
000.
00
Une
arnedint
ere
sti
ncome(orDis
cou
ntonnot
esr
ece
iva
ble
) 37,
354.
50
Une
arnedfr
anchi
serev
enu
e …………………….. 262,
645.
50

2.I
ni
ti
alser
vi
cesaredet
erminedtobesubst
ant
ial
l
yperf
ormed,
ther
efu
ndperiodh
asexpi
redandth
ecoll
ect
ionof
t
henoteisrea
sonabl
ya ss
ured,th
efu
llaccr
ualmet
hodwoul
dbeu s
ed.As
sumetha
tsubs
tan
tia
lperf
ormanceof
t
heini
ti
alse
rvi
cescos
tsP52,
529.1t
hee
n t
ryshoul
dbe:
Cas
h……….. 1
20,
000.
00
Not
esre
cei
vabl
e……………. 1
80,
000.
00
Unear
nedint
ere
stin
come(
orDi
scou
ntonn
ote
sre
cei
vabl
e) 37,
354.
50
Fra
nchi
serev
enue…………………….
. 262,
645.
50

Cos
toff
ranch
iser
eve
nue 52,
529.
1
0
Cas
h,et
c…………… 52,
529.
1
0

Fe
wmonthsaft
er,
thec
oll
ect
ibi
l
ityofthenotebe
comesdou
btfulornore
asona
blea
ssur
anc
e,t
hei
nst
all
ments
ale
s
met
hodc
ou l
dbeu s
edasagener
a lr
ule
.Inaddi
ti
ontoth
eentr
iesabov
e,f
oll
owi
ngent
ri
eswoul
dbere
quire
d:
a
.Tose
t-upc
ostoffr
anchi
se:
Noe
ntr
yrequi
red,a
lre
adyset
-uppr
evi
ous
ly.

b.
Todefe
rg ros
sprofi
tonf r
anchi
se:
Fr
anch
isereve
nue 262,
645.
50
Costoffr
anchi
serevenue 52,529.
10
Def
e r
redgrossprof
itonfra
nchis
e 210,1
16.
40

c
.Adj
ust
mentstorecog
n i
zegrossprof
itonf
ran
chi
se:
De
fer
redgrossprof
itonfr
a n
c h
ise 96,
000.
00
Re
ali
zedg r
ossprofi
tonfranchi
se 96,
000.
00

Fr
a n
c h
isereve
nue……….. 262,645.5
Le
ss:Costoffran
chi
serev
enue 52,529.
1
Grossprof
it……….. 210,11
6.4
Grossprof
itrat
e(210,
1
16.
4/262,
645.
5) 80%
 Col
l
ecti
onsast
oprinc
ipa
l……. P1
20,
000.
00
Mul
ti
pli
edby:Gros
sprof
itr
ate
…….
80%
Re
ali
zedg
ros
spr
ofi
tonf
ran
chi
se….
. P96,
000.
00

Probl
emV
Ifweassumet
hatECHI
,whos
efis
calyearendsonDecembe
r31,s
ecur
esthel
eas
eandthepermit
sonFe
brua
ry1
,
20x5,andope
rati
onsc
ommenceattha
tt i
me,thef
oll
owi
ngj
our
nalent
rie
swoul
dbeappropr
iate
:
Jul
y1,20x3:
Cash……….
. 1
20,
000
Not
esrece
ivabl
e……………. 480,
000
Un e
arnedfr
anchi
ser
eve
nue
…………………….
. 600,
000

Defer
ralofreve
nuer ecogni
ti
onisrequi
redwhen"subst
anti
alper
forma nce
"offranc
his
orserv
ice
shasnotbeen
complet
ed.I
twouldc al
lfordefer
ralofrev
enuerec
og ni
ti
onunti
levi
de nceofse
rvi
ceperfor
mancewasavai
l
abl
e.
Thebestevi
dence,
ofc ourse
,woul
dbet hecommencementofoperat
ionsofthefra
nchis
eoutl
etanda
tthispoi
nt
i
nt i
me,rev
enueisrec
og ni
zed.
Du
rin
g20x 3:
De
fer
redcostoffr
anc
his
ere
ven
ue…. 360,
000
Cash
…………. .
……….. 360,
000

Dec
ember31,
20x 3:
I
nte
res
trec
eiv
able(P480,
000x1
4% x6/
12)
………….
. 33,
600
Cas
h…………..……….. 33,
600

Fe
bruary1
,20x4:
Unea
rnedf
ranc
h i
ser
eve
nue
…………………….
. 600,
000
Fran
chi
sere
v e
nue
…………………….
. 600,
000

Cos
toff
ranc
his
er e
venue
…………………….. 360,
000
Def
err
edcostoffr
anchi
ser
eve
nue
…………………….
. 360,
000

Pr
obl
emVI
Re
ason
abl
yAs
sur
ed Nor
eas
ona
blea
ssu
ran
ce
Jan
ua r
y1,20x4
Cash………….. 1,
500,
000 1,
500,
000
Not
esrecei
vabl
e……. 4,
500,
000 4,
500,
000
Un ear
nedfr
anch
iser
eve
nue
……. 6,
000,
000 6,
000,
000
Re
cei
ptofi
ni
ti
alf
ranc
his
efe
e.

Condi
tionst
obemet: Cash Notes Cash Notes
Ser
vice
s No No No No
Per
iodofref
und Ye
s Yes Ye
s Yes
Re
asonably No
assu
red r
easonable
Coll
ect
ibi
l
ity assura
nc e
1
/1/20x4Bala
nce 1
,500,
000 4,
500,000 1
,500,
000 4,500,000
Stat
us L
iabi
li
ty Li
abi
l
ity L
iabi
li
ty Li
a bi
l
ity

De
cember31,
20x 4
Ca
sh………….. 1
,
575,
000 1
,
575,
000
Not
esre
cei
v a
ble……. 1
,1
25,
000 1
,1
25,
500
I
nte
res
tincome(P3,
750,
000x1
0% ) 450,
000 450,
000
Annua
lcol
l
ect
ion.

De
fer
redcos
toff
ran
chi
se 1
,
800,
000 1
,
800,
000
Cas
h………………… 1
,
800,
000 1
,
800,
000
Todeferc
ostoff
ranc
his
es i
ncesubs
tant
ial
se
rvi
cesha
dnotbeenperformed.

Oper
ati
nge
xpe
nse
s 1
20,
000 1
20,
000
Cash
………………… 1
20,
000 1
20,
000
Tor
ecor
dex
pens
es.

Adj
ust
me nts
:
Cos
toffranchis
e 1
,
800,
000
Defer
r e
dc ostoff
ran
chi
se 1
,
800,
000
 Tor
ecog
nizec
ostoff
ranc
his
e.

Un
earne
dfran
chi
ser
eve
nue
……. 6,
000,
000
Fr
anchi
ser
eve
nue 6,
000,
000
Torec
ogni
zefra
nchi
ser
eve
nueba
sedont
he
fol
l
owi
nganal
ysi
s:
Condi
tionst
obemet: Cash Notes
Ser
vice
s Ye
s Yes
Per
iodofref
und Ye
s Yes
Rea
son a
bly
Coll
ect
ibi
l
ity assure
d
1
/1/20x4Bala
nce………………….. 1,
500,
000 4,500,000
1
2/31/20x4:
Colle
cti
ona
stopri
nci
pal 1
,1
25,
000 (1
,125,
000)
1
2/31/20x4Balanc
e 2,
625,
000 2,625,000
Stat
us Rev
enu
e Revenue

Adjus
tment
s(I
nstal
l
me ntsal
esme
thod)
a.Toset
-upcostoffr
a nc
his
e:
Noent
ry*

b.
Toset
-updefe
rredgrossprofi
t
Un
earne
dfranc
hiser
evenue 6,
000,
000
Def
erre
dcostoff
r a
n c
hiserev
enu
e 1,
800,
000
Def
erre
dgrosspr
ofit 4,
200,
000
*The r
ea r
ediff
ere
ntopti
onsonthi
sma t
ter
,anentr
yma ybemadetoset
-upc os
toffra
nchi
seandeve
ntua
ll
yitwi
l
lbecl
osedt
oset-updef
err
ed
grossprof
it.
Regar
dle
ssoftheopti
on,
theobje
cti
veist
oset
-updef
erre
dg ros
sprofi
t.
Refert
oIl
l
ustr
ati
on9-6foral
te
rna
tiv
etr
eat
me ntt
oset
-up
costoffra
nchis
e.
Condi
tionst
obemet: Cash Notes
Ser
vice
s Ye
s Yes
Per
iodofref
und Ye
s Yes
No
r
ea sonabe
Coll
ect
ibi
l
ity assurance
1
/1/20x4Bala
nce………………….. 1,
500,000 4,500,000
1
2/31/20x4:
Colle
cti
ona
stopri
nci
pal 1
,1
25,000 (1
,125,
000)
1
2/31/20x4Balanc
e 2,
625,000 2,625,000
Stat
us Reve
nue– L i
a bi
li
ty
I
/SMe t
hod

c
.Tor
ecogni
zereal
izedg r
ossprof
itonf
ranch
ise
:
Defe
rredgrossprofi
t 1
,
837,
500
Real
ize
dg ros
spr of
itonfra
nch
ise 1
,
837,
500
Col
l
ect
ions–pri
nci
palxgr
osspr
ofi
tra
te
P2,
625,000x(6,
000–1 ,
800)
/6,
000=P1
,
837,
500

2.
Re
ason
abl
yAs
sur
ed Nor
eas
ona
blea
ssu
ran
ce
Inc
omeS tate
me nt,12/31/
20x4:
Franch
isereve
nu e(accrualmet
hod)* P6,
000,
000 P 0
Less
:Costoffranchise(ac
crual
me t
hod)* 1
,
800,
000 0
Grossprofi
tonr egularfr
anchi
se(ac
crual
)* P4,
200,
000 P 0
Add:Grossprofi
tonf r
anchi
se(i
nst
all
ment
sal
esme t
h od) -0- *1,
837,500
Grossprofi
tonfra nchi
se P4,
200,
000 P1,
837,500
Less
:Ope r
ati
nge xpen s
es 1
20,
000 120,
000
P4,
080,
000 P1,717,
500
Add:
Inte
res
tin
come
…………….
. 450,
000 450,000
Neti
ncome……………. P4,
530,
000 P2,167,
500

Pr
obl
emVI
I
1
.
Re
ason
abl
yAs
sur
ed Nor
eas
ona
blea
ssu
ran
ce
Jan
ua r
y1,20x4
Cash………….. 1,
440,
000 1,
440,
000
Not
esrecei
vabl
e……. 3,
840,
000 3,
840,
000
Un ear
nedint
ere
sti
ncome* 796,
896 796,
896
Un ear
nedfr
anchi
serev
enu
e……. 4,
483,
104 4,
483,
104
Re
cei
ptofi
ni
ti
alf
ranc
his
efe
e.

Con
dit
ion
stobeme
t: Ca
sh Not
es(
PV) Ca
sh Not
es(
PV)
 Se
rvic
es** No No No No
Pe
riodofref
und–u
nti
lda
teof
Openin
g No No No No
Re
asona
bly No
ass
ure
d re
asonabl
e
Coll
ect
ibi
l
ity assu
rance
1
/1/20x4Bala
nce 1
,
440,000 3,
043,
104*** 1
,
440,000 3,
043,
104***
Stat
us Lia
bil
it
y Li
abi
li
ty Lia
bil
it
y Li
abil
i
ty
*Une a
r nedi
nter
esti
ncomeordis
c ountonnot
esr
ece
iva
ble
:P3,840,
000–P3,043,
104=P796,
896.
**Se rv
ic e
shadbeensubst
ant
ial
l
ype rf
ormedonl
yonthedateofopeni
ngwhi
chisDec
ember8.Re
venuei
sde
fer
reda
nds
ubs
eque
ntdi
rec
tcos
tof
fr
a nchises
houl
da l
sobedef
erred.
***P960,000x3. 1
699=P2,535,920

Fe
bruary2,20x4:
Def
err
edc os
toffr
anc
his
e 1
44,
931
.
20 1
44,
931
.
20
Cash………………… 1
44,
931
.
20 1
44,
931
.
20
Todeferc
ostoff
ranc
his
es i
ncesubs
tant
ial
se
rvi
cesha
dnotbeenperformed.

Ju
ne13,20x4:
Gene
ralexpen
ses 60,
000 60,
000
Cash………………… 60,
000 60,
000
Tor
ecor
dex
pens
es.

Au
gust8,20x4:
Def
erre
dc os
toffr
anc
his
e 360,
000 360,
000
Cash………………… 360,
000 360,
000
Todeferc
ostoff
ranc
his
es i
ncesubs
tant
ial
se
rvi
cesha
dnotbeenperformed.

Nov
ember2,20x4:
Def
err
edc os
toffr
anc
his
e 840,
000 840,
000
Cash………………… 840,
000 840,
000
Todeferc
ostoff
ranc
his
es i
ncesubs
tant
ial
se
rvi
cesha
dnotbeenperformed.

Nov
ember2,20x4:
Subs
tan
tialc
omple
ti
onofs
erv
ice
s.

De
cember31,
20x4:
Ca
sh………….. 960,
000 960,
000
Not
esre
cei
vabl
e………………… 960,
000 960,
000
Annua
lcol
l
ect
ions
.

Adjust
me nts
:
Un e
arnedi n
teresti
ncome 304,
310.
40 304,
310.
40
In
tere
s ti
n c
ome 304,
310.
40 304,
310.
40
Torecog n
izeinte
resti
ncomet
hru
amorti
za t
ionasfoll
ows
:
1
0% xP3, 043,
104=P304,31
0.4.

Cos
toff
ranc
his
e 1
,
344,
931
.
20
Def
err
edcostoff
ran
chi
se 1
,
344,
931
.
20
Tor
ecog
nizec
ostoff
ranc
his
e.

Un
earne
dfran
chi
ser
eve
nue
……. 4,
438,
1
040
Fr
anchi
ser
eve
nue 4,
438,
1
040
Torec
ogni
zefra
nchi
ser
eve
nueba
sedont
he
fol
l
owi
nganal
ysi
s:
Condi
tionst
obemet
: Cash Not
es(
PV)
Ser
vice
s** Ye
s Yes
Peri
odofrefu
nd–ou
tle
tal
rea
dy
opened. Ye
s Yes
Re
asonabl
y
Coll
ect
ibi
l
ity assu
red
1
/1/20x4Bala
nce 1
,
440,
000 4,
438,104
1
2/31/20x4:
Collec
ti
on…………….
.
.
...P960,
000
L
ess
:In
tere
stc
oll
ect
ion
… 304,
310.
40
Col
lect
ion–Princ
ipal
…….
P655,
689.
60 655,
689.
60 (655, 60)
689.
2,
095,
689.
60 2,
387,
414.
40
S
tat
us Rev
enue Rev
enue
 Adjus
tme nt
s(Ins
tal
lmentsal
esmet
hod)
a.Toset-upcostoffranc
his
e:
Costoffra
n c
his
er e
venue
….. 1
,
344,
931
.
20
De fe
rredcostoffr
anchi
ser
eve
nue 1
,
344,
931
.
20

b.
Toset
-u pdef
erredgros
sprof
it
:
Un
earnedfranc
hiser
evenu
e 3,
483,
1
04
Costoffr
anchi
serev
enue 1
,344,
931
.
20
Def
e rr
edgrosspr
ofi
t 2,
138,
1
72.
80
*The r
ea r
ediff
ere
ntopti
onsonthi
sma t
ter
,anentr
yma ybemadetoset
-upc os
toffra
nchi
sea
ndevent
ual
lyi
twi
l
lbecl
osedt
oset-updef
err
ed
grossprof
it.
Regar
dle
ssoftheopti
on,
theobje
cti
veist
oset
-updef
erre
dg ros
sprofi
t.
Refert
oIl
l
ust
rat
ion9-5f
oral
te
rna
tiv
etr
eat
me ntt
oset
-up
costoffra
nchis
e.
Condi
tionst
obemet
: Cash Not
es(
PV)
Ser
vice
s** Ye
s Yes
Peri
odofrefu
nd–ou
tle
tal
rea
dy
opened. Ye
s Yes
Noreas
onabl
e
Coll
ect
ibi
li
ty assur
ance
1
/1/
20x4Ba l
ance 1
,
440,
000 304,
104
1
2/31/
20x4:
Coll
ect
ion……………...
.
..P960,
000
Less
:In
teres
tcol
lec
ti
on … 304,
310.
40
Coll
ect
ion–Pr i
nci
pal…….
P655,
689.
60 655,
689.
60 (655,
689.
60)
2,095,
689.
60 2,
387,
414.
4
S
tat
us Revenu
e–I/S Li
abi
li
ty
Met
hod

c
.Tor
ecogni
zereal
izedg r
ossprof
itonf
ranch
ise
:
Defe
rredgrossprofi
t 1
,
466,
983.
20
Real
ize
dg ros
spr of
itonfra
nch
ise 1
,
466,
983.
20
Col
l
ect
ions–pri
nci
palxgros
spr
ofi
tra
te
P2,
095,689.
60x(4,
483,
104–1
,
344,
931
.
20)
/4,
483,
1
04=P1
,
466,
983.
20
2.
Re
ason
abl
yAs
sur
ed Nor
eas
ona
blea
ssu
ran
ce
Inc
omeS tate
me nt,12/31/
20x4:
Franch
isereve
nu e(accrualmet
hod)* P4,
471
,
1040 P 0
Less
:Costoffranchise(ac
crual
me t
hod)* 1
,
344,
931
.
20 0
Grossprofi
tonr egularfr
anchi
se(ac
crual
)* P3,
1
38,
1
72.
8 P 0
Add:Grossprofi
tonf r
anchi
se(i
nst
all
ment
sal
esme t
h od) -0- *1
,466,
983.
20
Grossprofi
tonfra nchi
se P3,1
38,1
72.
8 P1
,466,
983.
20
Less
:Ope r
ati
nge xpen s
es 60,
000 60,
000
P3,078,1
72.
8 P1
,
406,983.
20

Add:
Inte
res
tin
come
…………….
. 304,
310.
40 304,
310.
40
Neti
ncome……………. P3,
382,
483.
20 P1
,
771,
293.
60
*Not e:
Thisit
emr epresent
sr e
gularf
r anchi
sesa
les-typetra
ns ac
ti
on.I
ft hecol
lect
ibi
li
tyofthefe
e( noterec
e i
vabl
e)is
rea
s onabl
ya s
s ur
ed,thepe r
missi
bleme thodtobea ppliedshoul
dbet hea c
c r
ualme t
hod.I
tshouldbeobs ervedthat
i
nt hee ve
nt,thereiscostoffranchi
sea ndtheinsta
llmentsale
sme t
hodi sused,theconce
ptofr evenuerecogni
tion
doeslite
ral
lya pplytofranchi
serevenuebuttot her e
cogni
tionofreal
izedg ros
sprofi
tonf r
anchi
s ethr
uc oll
ect
ions
astopr i
nci
palmul ti
pli
edbyg rossprofitrat
e.
Al
te
rna
tiv
ely,
comput
ati
onofi
nte
res
tandpr
inc
ipa
lcol
l
ect
ionsa
rea
sfol
l
ows
:
I
nter
est(
10% of
Date Col
l
ect
ion Unpai
dBa l
anc
e) Pr
inc
ipa
l Unpai
dBa l
anc
e
1/03/
20x4 4,
483,
104
1/03/
20x4 1,
440,
000 -0- 1,440,000 3,
043,
104
12/31
/20x
4 960,
000 304,31
0.40 655,689.60 2,
387,
414.
40
Total 2,
400,
000 304,31
0.40 2,095,689.60

Probl
emVI
II
1. Thef
eei
sea
rne
dforpr
ovi
din
gcon
tin
uin
gse
rvi
ces
:
Ca
shorAccou
ntsre
cei
vabl
e………… 1
08,
000
Fr
anch
iserev
enue–cont
inu
ingf
ran
chi
sef
ee 1
08,
000

2. I
fP1
0,000oft
hef
eei
sforn
ati
ona
ladv
ert
is
ing
:
Ca
shorAccou
ntsre
ceiv
able………… 1
08,
000
Fr
anchi
serev
enue–c ont
inui
ngfr
anchi
sef
ee 96,
000
Unea
rnedfra
nchi
sereve
n u
e–c ont
inu
ingf
ran
chi
sef
ee…… 12,
000
 Thef
ranc
his
orre
cogni
zesth
eu ne
arne
dfranc
hisefe
esasr
eve
nuewh
eni
tpe
rfor
mst
hea
dve
rti
si
ngs
erv
ice
san
d
al
sor
ecor
dsthec
ost
sasexpens
es,t
heent
ri
esshoul
dbe:
Adv
ert
is
ingexpe
nse
s………… x
xx
Cash,
etc
……………….. x
xx

Un
earne
dfran
chi
sere
ven
ue–c on
tin
uingf
ran
chi
sef
ee…… 1
2,
000
Fr
anchi
ser
eve
nue–cont
inu
ingfran
chi
sef
ee 1
2,
000

Pr
oblemI
X
Marc
h20:
Cas
h 5,
000
Not
esr
ece
ivabl
e 20,
000
Une
arnedfr
anc
his
efe
e 25,
000

J
une1
5:
Un
earne
dfran
chi
ser
eve
nue 25,
000
Fr
anchi
ser
eve
nue 25,
000

J
uly1
5:
Ca
sh 500
Se
rvi
cer
eve
nue 500

Pr
obl
emX
Ca
shorAccou
ntsre
cei
vabl
e… 1
17,
600
Fr
anch
iserev
enue–suppl
ie
ssa
les
…………….
. 1
17,
600

Cos
toffr
anc
his
e–s uppl
i
essa
les
……… 90,
000
Suppl
i
esi
nvent
ory………. 90,
000

Pr
obl
emXI
Cas
h……………. 21
,
600
Not
esre
cei
vabl
e(P1
08,000–P21 ,600) 86,
400
Unear
nedint
ere
sti
n come(P86,400–P69,
978) 1
6,422
Fra
nchi
serev
enue(P21,
600+69, 978–P4,
800*) 86,
778
Unear
nedfr
anchi
sere v
enu
e–e qui
pmen
tsal
e* 4,
800

Al
lthecr
it
eri
ator e
cogn
izeini
ti
alf
ranc
hisef
eeasr
eve
nuewasmet
,ex
cepttha
tanamou
ntofP4,
800e
qui
val
entt
o
i
ndic
ate
dprofi
t(P24,
000,se
ll
ingpr
icel
essP1
9,
200opt
ionpr
ice
)wi
l
lbedefe
rred.
Wh
ent
hef
ran
chi
sees
ubs
equ
ent
lypu
rch
ase
sth
eequ
ipme
nt,
thee
ntr
iesa
rea
sfol
l
ows
:
Ca
shorAccou
ntsrec
eiv
able… 1
9,
200
Une
arnedf
ranch
isere
venue–equi
pments
ale 4,
800
Fra
nchi
serev
enue–e qui
pmen
tsal
e…………….. 24,
000

Cos
toff
ran
ch i
se-equipme
nts
ale
………. 1
9,
200
Equi
pmentinv
ent
ory………. 1
9,
200

Pr
obl
emXI
I
Apr
il1,20x4:
Cas
h ……………. 288,
000
Not
esr ec
eiv
abl
e………… 1
92,
000
Fr a
n c
his
erev
enu
e(P21
,
600+P86,
400–P4,
800*) 480,
000

Dece
mbe r31,
20x 4:
Fr
anchi
serevenue–in i
ti
alfranc
his
efe
e 480,
000
Int
eres
tincome(P192,
000x8% x9/ 12) 11
,
520
Cash(P1
53,600–P1 1
,520)…………. 1
42,
080
Notesre
cei
v a
ble…………… 1
92,
000
Gainorrevenuefr
omr eposs
ess
edfr
anchi
se…………… 1
34,
400

Pr
obl
emXI
II
Cas
h 72,
000
Not
esr
ecei
vabl
e………… 360,
000
Def
err
edf r
anc
his
epu
rch
aseopt
ionl
i
abi
l
ity……. 432,
000

De
fer
redc
ostoff
ran
chi
ser
eve
nue
…………… 288,
000
 Ca
sh,
etc
……… 288,
000

I
nve
stment
…………………………. . 120,
000
Def
erre
df r
anch
isepurc
haseopti
onli
abi
l
ity……. 432,
000
Defer
redcostoff
ranch
isere
venu
e…………… 288,
000
Cash,e
tc……… 264,
000

Mul
ti
pleChoic
ePr obl
ems
1
.a–f ol
lowi
ngc ondi
ti
onsshou
ldbeobse
rve
dtore
cog
nizer
eve
nue
:
Ser
vic
es–n one
Per
iodofRefund–e xpir
ed
Col
lect
ibi
l
ityofthenote–reas
onabl
yass
ure
d
Th
erewa
sfa
il
ureonon
econ
dit
ion
;th
ere
for
e,n
ore
ven
ues
hou
ldber
ecog
nize
d.
2.d–f ol
lowi
ngcondit
ionsshou
ldbeobserv
edt or
ecog
nizer
eve
nue
:
Ser
vice
sP er
forme
d–ye s
Per
iodofRe f
und–n ote
xpir
ed/sti
llr
efundabl
e
Col
lect
ibil
i
tyofthenote–r eas
ona
blyassure
d
Th
erewa
sfa
il
ureonon
econ
dit
ion
;th
ere
for
e,n
ore
ven
ues
hou
ldber
ecog
nize
d.
3.a-foll
owingcondi
ti
onsshoul
dbeobse
rve
dtorec
ogn
izerev
enue:
Ser
vic
esPerfor
me d–n one
Per
iodofRefund–e xpir
ed
Col
lect
ibi
l
ityofthenote–veryu
ncer
tai
norex
tre
mel
yu n
certa
in.
Ther
ewasfai
l
ureononecondi
ti
on;t
her
efore
,norev
enueshou
ldberec
ogni
zed.Si
nce,thecol
l
ecti
bil
i
tyoft
he
not
eise
xtr
emel
yunce
rta
inre
cogni
ti
onoft
h enot
easana
sse
tinunwa
rra
nted(
orshoul
dn otberec
orded).
4.d–t hepro
ble
ma l
rea
dyindi
cat
edtha
tP300,
000isear
ned,t
her
efor
eth
ere
mai
ni
ngba
lan
ceofP400,
000
(P700,
000–P300,
000isc
onsi
dere
dasun
earn
edre
ven
ue.
5.a
Cas
h 6,
000
Not
esr
ece
ivabl
e 30,
000
Une
arnedfr
anc
his
efe
e 36,
000

6.b 
Un
earne
dfran
chi
sefee 36,
000
Fr
anchi
sef
eerev
enue 36,
000

7.a
Cas
h 6,
000
Not
esre
cei
vabl
e 30,
000
Fra
nchi
sefe
ere
ven
ue 36,
000

8.b
9.b
10.d
11.d–thef
ran
chi
sef
eerev
enu
eshoul
dbezero,s
inc
enos
ubs
tan
tia
lpe
rfor
man
ceofs
erv
ice
sha
dbe
enpe
rfor
med
(
andt
hedownpayme
nti
sst
il
lre
fun
dabl
e).
1
2.b
Inth
isproblem,sincet her
eisdoubtf
ulofcol
l
ecti
on,i
tissafe
lya s
sumedt
ou s
edins t
all
mentme
thod.
The
ref
ore
,
there
ali
zedg rosspr ofi
twouldbe:
Coll
ecti
onsi n20x 4……………………………………………………………. .P200,
000
x:Grossprofitra t
e[100% -( P1
50,000/
P500,000) ]
…………………………. 70%
Real
izedg rosspr ofi
tin20x4…………………………………………………. P140,
000
Reve
n u
eAn a l
ysi
s :
Ca s
h N/R
Servi
ces Yes Yes
Peri
odo fRefund Yes Yes
Collect
ibili
ty NoReas.Assur
ed
200,000 300,000
Status Rev–I/ SMethod Liabi
li
ty
1
3.d
Int
hispr
obl
em,
ful
lac
cru
alme
thodi
sus
edt
ore
cog
nize
dtei
h ni
ti
alf
ranc
his
efe
eof
I
ni
ti
alFr
anc
his
eFe
e:
Cash NotesRe
c ei
vabl
e
Ser
vic
es Ye
s Yes
Per
iodofRefund Ye
s Yes
Col
lect
ibi
l
ity Reas
onabl
yAs sur
ed
P20,
000 P80,
000
S
tat
us Reve
nue Revenue
S
ubsta
nti
alperf
ormanceofs er
vi
cesh asbe enrender
ed beca
u s
ec omme nce
mentofope r
ati
onsby the
f
ran
chis
eesha
llbepre
sume dtobetheearli
estpoi
ntofwhi
chsubst
an t
ialper
for
mancehasoc
curre
d,unl
essit
c
anbede monst
rat
edthatsubs
tant
ialpe
rformanceofal
lobli
gat
ions,i
nc l
udi
ngser
vi
cesr
endere
dv ol
unt
ari
ly,
h
asoccurr
edbefor
eth
attime.
Peri
odofr e
fundi
ngth eini
ti
alfra
nchi
sefeeandcol
lec
ti
bili
tyofth
en ot
esisnotanymoreapr oble
m( t
hey
dependont heprofi
tabil
it
yofitsfi
rs
tyearofope
rati
ons)becau
set
her e
sul
tofoper
a t
ionsinthefir
stye ari
s
prof
itable
.Theref
ore,theini
ti
alfr
anchi
sef
eeofP100,
000( P20,
000+PP80, 000)i
sc onside
reda srevenue
,
andac ont
inui
ngfranchis
efeeofP5,000( 1
% xP500, 000)shoul
dbea l
sober ecognizedasr evenue–
cont
inuingfanc
hise
.
Th
ere
for
e,t
hee
arn
edf
ran
chi
sef
eea
mou
nte
dtoP1
05,
000(
P100,
000i
ni
ti
alpl
usP5,
000c
ont
inu
ing
).

1
4.a
Ini
ti
alfr
anchi
seereve
nue(si
ncea
llserv
ice
sh a
dbe enperforme
d
anda s
sumedt h
atperi
odofrefu
n di
nga l
readyexpi
red)…………………………..
P100,
000
Add:Conti
nui
ngf r
anchi
serev
enue(5% xP800, 000)…………………………………… 40, 000
TotalRev
enuefromfranc
his
e………………………………………………………………. P140,
000
1
5.d
Therei
sal
rea
dysubs
tant
ialperf
orma
nceofser
vi
cesr
ende
reds
inc
e,t
hef
ran
chi
seou
tle
tst
art
edope
rat
ion
san
d
iti
sass
umedtha
tper
iodofr e
fundha
sexpi
red.
Th
econ
tin
uin
gfr
anc
his
efe
eisr
ecog
nize
dal
soa
sre
ven
ues
inc
eiti
sea
rne
datt
het
imei
twa
sre
cei
ved.
Thene ti
ncomewou ldbe :
Fr
a nc
hiseReven
ue:
Ini
ti
alFranchi
seFee:
Downpa yment
……………………………………………P30, 000
PVofi n
sta
ll
ment(
P10,
000x1.
7355)
……………………. 1 7,355P47,
355
Con t
inui
ngFran c
h i
seFee(
5% xP 500,
000) 25,
000
TotalFranchi
seRevenue………………………………………………………………… P72,
355
Add:Int
erestI
ncome( 10% xP17,
355)
………………………………………………… 1
,735
TotalReve
n ue
/NetIncome……………………………………………………………… P74, 090
1
6.a
Allcon
diti
onsthatin
iti
alfranc
h i
sef
eeberecog
nize
dasre
ve n
uehadbee
nme tasf
oll
ows:
RevenueAnalysi
sforIFF
Cash N/R
Ser
vic
es Yes Yes
Per
iodo fRef
u nd(
not
e) Yes Yes
Col
lect
ibil
i
ty Re
a s
.Assu
red
200,000 300,000
St
atus Re ve
nue Reve
nue
TheNetIncometh e
nwou ldbeasfol
lows
:
Franch
iseRevenue………………………………………………………………. .
P500,
000
Less
:CostofFr a
n chi
se…………………………………………………………… 1 50,000
NetInc
ome …………………………………………………………………………P350, 000
1
7.d
Inthi
sprobl
em,fullaccr
ualme t
hodisu
sedt
ore
cog
nizedthei
ni
ti
alf
ranc
his
efeeofP1
00,
000a
nal
yzea
s
fol
l
ows:
Reve
nueAna lysi
sforIFF
Cash N/R
Se
rvice
s Ye
s Yes
Pe
riodo fRefu
nd(not
e) Ye
s Yes
 Col
l
ect
ibi
l
it
y Reas
.Assu
red
20,
000 80,
000
Sta
tus Rev
enue Rev
enue
Not
e:Per
iodofrefu
ndi
ngthei
nit
ialf
ran
chi
sefeewaspres
ume
dtoh
avebe
ene xpi
redsi
ncet
hebu
sin
ess
ope
rat
esprof
it
ablyi
nit
sfi
rs
tye
arofoper
ati
on.
Conti
nui
ngFra
nchi
seFee:Cons
ide
redr
eve
nuet
hemome
ntc
ont
inu
ings
erv
ice
sha
dbe
enr
ende
reda
mou
nte
d
toP5,
000(1
% xP500,000).
I
nit
ial
Franchi
seFee…………………………………………………………P100,
000
Conti
nui
ngfra
n c
his
efee…………………………………………………. 5,
000
Tota
l……………………………………………………………………………P1 05,
000
Les
s:I
ndir
ectcos
toffra
nc h
ise
…………………………………………… 1 5,
000
Neti
ncome……………………………………………………………………P 90, 000
1
8.d
Reven
ue=P400, 000
In
teres
tin
c ome=P160,
000×8% ×9/ 12=P9,
600
Cash=P128,000–P9,600=P11
8,400
Reposs
ess
ionrev
enue:
P240,
000–P1 28,
000=P11
2,
000.
1
9.c
Cas
h=P560, 000+P48, 000=P608,
000
Fr
anchi
seFeeRevenu
e=P560, 000
Unea
rnedFranch
iseFees=P48,000×20% =P9,
600
Re
venuefr
omCon ti
nuin
gFr a
nchis
eFe
es=P48,
000–P9,
600=P38,
400.
20.b-P200,
000+P545,
872–P24,
000=P721
,
872.

21
.b
Franc
his
eefrequentl
ypu rcha
sesalloftheequi
pme nt,
products,
a nds uppliesfr
omt hefran
c h
isor.Th
ef ranch
isorwould
acc
ountforth e
ses al
esa sif
,itwou l
dbeapr oductsal
es.Some ti
me s,howe v
er,thefranchi
sea gr
e ementgrantsthe
fr
anchi
seetherighttoma kebargainpurchas
esofe qui
pmen torsu pplie
sa fte
rtheinit
ialf
ranchis
efe eispai
d.I ft he
barga
inpriceislowert h
att henorma lse
ll
ingpr i
ceofthes amepr oduc toritdoe snotpr ovi
det hefranc
h i
sorthe
rea
sonabl
epr ofi
t,then,apor ti
onoft heinit
ialfranc
his
ef ees h
ou ldbede f
erre
d.Th ede f
e r
redpor ti
onwou l
dbe
acc
ountedforasa dj
ust
me ntofthesell
i
n gpri
cewh enthefr
a nc
hiseesu bsequentl
ypu r
chasestheequipme n
tors uppli
es.
There
fore,
theamou ntofrevenuewouldbeP90,234c omputeda sfoll
ows :
Cash NotesRecei
vabl
e
Ser
vic
es Ye
s Yes
Per
iodofRefun
d Ye
s Yes
Col
lect
ibi
l
ity Reas
on abl
yAssur
ed
P25,
000 P68,234
S
tat
us Reve
nue Revenuee xc
eptP3,
000
r
ea s
onableprofi
tonsa
le
ofe qui
pment
Th
ere
venuefr
omf ra
n c
hisewoul
dbe :
Cash………………………………………………………………………………………………P25, 000
PVofNote…………………………………………………………………………. .P68,
234
Les
s:Rea
sonabl
epr ofi
tonsa
leof
EquipmentP15,
000–P1 2,
000)
………………………………………….… 3,
000 65,
234
P90,
234
I
nci
dent
all
y,theentri
eswoul
dbe :
Uponrecei
ptofIFF:
Cash…………………………………………………………………………25, 000
Not
e sRe
ceiv
able
…………………………………………………………90, 000
Unear
nedIn
teres
tIncome(P90,
000–P68,
234)…………. 21,
766
Fra
nchi
seRev
enue……………………………………………. 90,
234
Unear
nedFranch
iseReve
nue………………………………. 3,000
I
fequ
ipme
ntwass
old:
Cas
horAc c
ountsRece
iva
ble…………………………………………12,000
Une
arne
dFr anchi
seReve
nue………………………………………… 3, 000
Fran
chiseRev
enue–Equipme
nt…………………………… 1
5,000
Cos
tofS
ale
s–e qu
ipment
………………………………………………12,
000
Equi
pmentI
nve
ntor
y………………………………………….
. 1
2,
000
22.
b
Cas
h Not
esRece
iva
ble
Se
rvic
es No No
Pe
riodofRe
fun
d No No
 Col
l
ect
ibi
l
it
y Reas
ona
blyAssur
ed
P25,
000 PV-P39,623
FV–P50,000
UI
I/
Dis
ct.
P10,
377
S
tat
us L
iabi
l
ity Li
abi
li
ty
Theor
ies
1. True 6. Tr
ue 11
.a
2. Fals
e 7. Tr
ue 1
2. b
3. Fals
e 8. Tr
ue 1
3. a
4. Fals
e 9. b 1
4. d
5. True 1
0, d 1
5,