2. If the collection of the note receivable is reasonably assured, what is the net income to bereported by the entity for the year ended December 31, 2020?a. 98,850b. 94,850c. 70,028d. 92,0378907 2. On January 1, 2020, an entity granted a franchise agreement to a franchisee. The contract providedthat the franchisee shall pay an initial franchise fee of P500,000 and on-going payment of royaltiesequivalent to 8% of the sales of the franchisee.On January 1, 2020, the franchisee paid down payment of P200,000 and issued a 3-year noninterestbearing note for the balance payable in three equal annual installments starting December 31, 2020.The note has present value of P240,183 with effective interest rate of 12%.On June 30, 2020, the entity completed the performance obligation of the franchise at a cost ofP352,146. Aside from that, the entity incurred indirect cost of P22,009.The franchisee started operation on July 1, 2020 and reported sales revenue amounting to P50,000for the year ended December 31, 2020. The franchisee paid the first installment on its due date.

Franchise Account The Purpose of providing the franchise business to allow to use the reputation of…

2. If the collection of the note receivable is reasonably assured, what is the net income to be reported by the entity for the year ended December 31, 2020? a. 98,850 b. 94,850 c. 70,028 d. 92,037 8907

2. If the collection of the note receivable is reasonably assured, what is the net income to be reported by the entity for the year ended December 31, 2020? a. 98,850 b. 94,850 c. 70,028 d. 92,037 8907

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

2. If the collection of the note receivable is reasonably assured, what is the net income to be
reported by the entity for the year ended December 31, 2020?
a. 98,850
b. 94,850
c. 70,028
d. 92,037
8907

2. On January 1, 2020, an entity granted a franchise agreement to a franchisee. The contract provided
that the franchisee shall pay an initial franchise fee of P500,000 and on-going payment of royalties
equivalent to 8% of the sales of the franchisee.
On January 1, 2020, the franchisee paid down payment of P200,000 and issued a 3-year noninterest
bearing note for the balance payable in three equal annual installments starting December 31, 2020.
The note has present value of P240,183 with effective interest rate of 12%.
On June 30, 2020, the entity completed the performance obligation of the franchise at a cost of
P352,146. Aside from that, the entity incurred indirect cost of P22,009.
The franchisee started operation on July 1, 2020 and reported sales revenue amounting to P50,000
for the year ended December 31, 2020. The franchisee paid the first installment on its due date.

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