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    ACCTRAN Engage: Kaya Ulit Natin To Partner!

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    Kristine Santander
    This document describes a contract between ABC Co. and a customer involving the transfer of a license and equipment. It asks to identify: 1) Two performance obligations - the license and equipment, which are distinct and transferred at different times 2) A transaction price of PHP 80,747 from a down payment and note receivable 3) An allocation of the transaction price to the performance obligations based on their standalone selling prices 4) The recognition of revenue when each performance obligation is satisfied - PHP 41,409 for the equipment on 1/15/2021 and PHP 39,338 for the license on 2/1/2021

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    ACCTRAN Engage: Kaya Ulit Natin To Partner!

    Uploaded by

    Kristine Santander
    85 views2 pages
    This document describes a contract between ABC Co. and a customer involving the transfer of a license and equipment. It asks to identify: 1) Two performance obligations - the license and equipment, which are distinct and transferred at different times 2) A transaction price of PHP 80,747 from a down payment and note receivable 3) An allocation of the transaction price to the performance obligations based on their standalone selling prices 4) The recognition of revenue when each performance obligation is satisfied - PHP 41,409 for the equipment on 1/15/2021 and PHP 39,338 for the license on 2/1/2021

    Original Description:

    Franchise Accounting

    Original Title

    Acctran Engage

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    This document describes a contract between ABC Co. and a customer involving the transfer of a license and equipment. It asks to identify: 1) Two performance obligations - the license and equipment, which are distinct and transferred at different times 2) A transaction price of PHP 80,747 from a down payment and note receivable 3) An allocation of the transaction price to the performance obligations based on their standalone selling prices 4) The recognition of revenue when each performance obligation is satisfied - PHP 41,409 for the equipment on 1/15/2021 and PHP 39,338 for the license on 2/1/2021

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    85 views2 pages

    ACCTRAN Engage: Kaya Ulit Natin To Partner!

    Uploaded by

    Kristine Santander
    This document describes a contract between ABC Co. and a customer involving the transfer of a license and equipment. It asks to identify: 1) Two performance obligations - the license and equipment, which are distinct and transferred at different times 2) A transaction price of PHP 80,747 from a down payment and note receivable 3) An allocation of the transaction price to the performance obligations based on their standalone selling prices 4) The recognition of revenue when each performance obligation is satisfied - PHP 41,409 for the equipment on 1/15/2021 and PHP 39,338 for the license on 2/1/2021

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 2

    ACCTRAN Engage: Kaya ulit natin to Partner!

    Question 1
    On January 1, 2021, ABC Co. enters into a contract with a customer to transfer a license.

     the initial franchise fee is P100,000 payable as follows: 20% cash down payment upon signing
    of the contract and the balance is payable in 4 equal annual installments starting December 31,
    2021. The appropriate discount rate is 12%.
     The contract also requires ABC Co. to transfer equipment to the customer. The equipment has a
    cost of P30,000 and a stand-alone selling price of P40,000.
     The license has a stand-alone selling price of P38,000.
     ABC Co. regularly sells the license and the equipment separately.
     The license provides the customer the right to use the entity's intellectual property as it exists
    at the point in time at which the license is granted.
     The equipment is transferred to the customer on January 15, 2021 while the license is
    transferred to the customer on February 1, 2021.

    Requirements: Apply "Steps 2 to 5" of PFRS 15 to identify the following:

    A. The performance obligation(s) in the contract. State how the performance obligation(s)
    are satisfied

    Two separate performance obligations in the contract are as follows:


    1. License (satisfied at a point of time)
    2. Equipment (satisfied at a point of time)
    The promise to grant the license and the promise to transfer the equipment are distinct because
    the customers benefit from each other's promise independently or together with other
    resources that are available. Thus the license together with the equipment that is delivered
    before opening the franchise and the equipment is used in the franchise pr sold in an amount can
    benefit the customer. The license and equipment are separately identifiable.

    B. The transaction price

    Cash down payment (100Kx20%) ₱20,000


    PV of note receivable: [(100k x 80%)/4] x PV of ordinary annuity @ 12%, n=4 60,747
    Transaction Price ₱80,747

    C. Allocation of the transaction price

    Performance Stand-alone Selling


    Allocation Transaction Price
    Obligations Prices
    (80,747 x 38,000/
    License 38,000 39,338
    78,000)
    (80,747 x 40,000/
    Equipment 40,000 41,409
    78,000)
    Total 78,000 80,747
    D. The recognition of revenue from the contract

    Recognize revenue when a performance obligation is satisfied. ₱41,409 is allocated to the


    equipment will be recognized as revenue on January 15, 202, while the ₱39,338 allocated to the
    license will be recognized as revenue on February 1, 2021

    E. Provide the necessary journal entries in January and February 2021

    Entry on Jan 1, 2021


    1/1/2021 Cash on Hand ₱20,000
    Note Receivable 80,000
    Contract Liability ₱80,747
    Unearned Interest Income 19,253
    #
    1/15/2021 Contract Liability 41,409
    Revenue 41,409
    #
    1/15/2021 Cost of Sales 30,000
    Revenue 30,000

    Entry on March 1, 2021

    2/1/2021 Contract Liability 39,338


    Revenue 39,338

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