On January 1, 20x1, an entity grants a franchisee the right to operate a restaurant in a specific market using the entity’s brand name, concept and menu for a period of ten years. The entity has...

On January 1, 20x1, an entity grants a franchisee the right to operate a restaurant in a specific market using the entity’s brand name, concept and menu for a period of ten years. The entity has granted others similar rights to operate this restaurant concept in other markets. The entity commonly conducts national advertising campaigns, promoting the brand name, and restaurant concept generally. The franchisee will also purchase kitchen equipment from the entity. The entity will receive ₱950,000 upfront (₱50,000 for the kitchen equipment and ₱900,000 for the franchise right) plus a royalty, paid quarterly, based on 4% of the franchisee’s sales over the life of the contract. The ₱50,000 amount reflects the stand-alone selling price of the kitchen equipment. The entity delivers the kitchen equipment to the customer on February 1, 20x1. The customer commences business operations on April 1, 20x1 and reports total sales of ₱5,000,000 for the year.
How much total revenue should the entity recognize from the contract in 20x1?

a. 117,500

b. 317,500

c. 340,000

d. 1,150,000