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How much total revenue is recognized from the contract

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Reference no: EM132891039

Problem 1: On July 1, 20x1, Wash Co. grants a franchisee the right to sell Wash Co.'s products in a specific market over a period of 10 years. The franchise contract requires an upfront fee of P800,000, which includes P100,000 for equipment that Wash Co. will provide to the franchisee. The amount reflects the stand-alone selling price of the equipment. In addition, the franchisee will pay a 10% sales-based royalty. Wash Co. has granted similar rights to other franchisees in other locations. Wash Co. regularly undertakes activities that promote the brand name nationally. Wash delivers the equipment to the franchisee on July 15, 20x1. The franchisee starts selling the products on August 1, 20x1 and reports total sales of P600,000 for the year. How much total revenue is recognized from the contract in 20x1?

a. 860,000

b. 760,000

c. 213,259

d. 189,167

Reference no: EM132891039

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