Vinna P. Zabate BSA-3
M6 Franchise Operations – Franchisor
Engage: Kaya ulit natin to Partner
ABC Co.
A. The performance obligations in the contract are the following:
1) License (satisfied at a point in time)
2) Equipment (satisfied at a point in time)
B. Transaction price.
Cash down payment (100,000 x 20%)
PV of NR: [(100,000 x 80%) / 4] x 3.0373
Transaction price
C. Allocation of the transaction price.
Performance
Stand-alone
obligations
selling prices
License
₱38,000
Equipment
40,000
Total
₱20,000
60,747
₱80,747
Allocation
(80,747 x 38,000/78,000)
(80,747 x 40,000/78,000)
Transaction
price
₱39,338
41,409
₱80,747
D. The recognition of revenue from the contract.
The ₱41,409 allocated to the equipment will be recognized as revenue on
January 15, 2021, while the ₱39,338 allocated to the license will be recognized as
revenue on February 1, 2021.
E. Necessary journal entries in January and February 2021.
January 1, 2021
Cash on hand
₱20,000
Notes receivable
80,000
Contract liability
Unearned interest income
January 15, 2021
Contract liability
Revenue
₱80,747
19,253
₱41,409
₱41,409
#
Cost of sales
Inventory
February 1, 2021
Contract liability
Revenue
₱30,000
₱30,000
₱39,338
₱39,338