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

◄ 1st Final Quiz

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