Reference no: EM132713921

Assume that the Jollibee Company sells a franchise that requires an initial franchise fee of P840,000. A down payment of P240,000 cash is required, with the balance covered by the issuance of a P600,000, 10% note payable by the franchisee in five equal annual installments.

Required:

Problem 1: Prepare entries on the books of franchisor Jollibee to record the following, assuming:

a. Jollibee has substantially performed all material services. the refund period has expired, and the collectability of the note is reasonably assured.

b. The refund period has expired and the collectability of the note is reasonably assured, but Jollibee has not substantially performed all material services.

c. Jollibee has substantially performed all services and the collectability of the note is reasonably assured, but the refund period has not expired.

d. Jollibee has substantially performed all services and the refund period has expired, but the collectability of the note is not reasonably assured. Jollibee recognizes' revenue by the installment sales method.

e. The refund period has expired, but Jollibee has not substantially performed services and there is no basis for estimating the collectability of the note and the recognition of the note as an asset is unwarranted.

f. Now assume that Jollibee has earned only P360,000 from providing initial services with the balance being a down payment for continuing services. If the refund period has expired and the collectibility of the note is reasonably assured.

g. In addition to the initial franchise fee of P840,000, Jollibee Company also charges the franchisee a continuing franchise fee P108,000 per year, assuming further:

i. The fee is earned for providing continuing services.

ii.. If P10,000 of the fee is for national advertising.

h. During the year Jollibee Company, sells supplies costing P90,000 to the franchisee at the normal price of P117,600.