At the beginning of current year, Seashore Company signed an agreement to operate as a franchisee for an initial franchise fee of P6,000,000. On the same date, the entity paid P2,000,000 and agreed to pay the balance in four equal annual payments of P1,000,000 at every year-end. The down payment is not refundable and no future services are required of the franchisor. The entity can borrow at 14% for a loan of this type. Present value of 1 at 14% for 4 periods Future amount of 1 at 14% for 4 periods Present value of an ordinary annuity of 1 at 14% for 4 periods 0.59 1.69 2.91 What is the initial measurement of the franchise? а. 6,760,000 b. 6,000,000 c. 4,910,000 d. 4,360,000
At the beginning of current year, Seashore Company signed an agreement to operate as a franchisee for an initial franchise fee of P6,000,000. On the same date, the entity paid P2,000,000 and agreed to pay the balance in four equal annual payments of P1,000,000 at every year-end. The down payment is not refundable and no future services are required of the franchisor. The entity can borrow at 14% for a loan of this type. Present value of 1 at 14% for 4 periods Future amount of 1 at 14% for 4 periods Present value of an ordinary annuity of 1 at 14% for 4 periods 0.59 1.69 2.91 What is the initial measurement of the franchise? а. 6,760,000 b. 6,000,000 c. 4,910,000 d. 4,360,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:At the beginning of current year, Seashore Company signed
an agreement to operate as a franchisee for an initial
franchise fee of P6,000,000.
On the same date, the entity paid P2,000,000 and agreed to
pay the balance in four equal annual payments of P1,000,000
раy
at every year-end.
The down payment is not refundable and no future services
are required of the franchisor. The entity can borrow at 14%
for a loan of this type.
Present value of 1 at 14% for 4 periods
Future amount of 1 at 14% for 4 periods
Present value of an ordinary annuity of
1 at 14% for 4 periods
0.59
1.69
2.91
What is the initial measurement of the franchise?
6,760,000
- b.
а.
6,000,000
4,910,000
d. 4,360,000
с.
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