NAPA WINERY charges an initial fee of P5M for a franchise with P2M paid when the agreement is signed and the balance in three annual payments. The present value of the annual payments, discounted at 15% is P2,283,200. The franchisee has the right to purchase P750,000 winery equipment and barrels for P690,000. An additional part of the initial fee is advertising to be provided by NAPA during the next three years. The value of the advertising is P250,000 per annum. Collectability of the note is reasonably assured and NAPA has performed all the initial services stated in the contract. What is the amount of the revenue from franchise fee? a.3,473,200 b.4,223,200 c.4,940,000 d.3,533,200

NAPA WINERY charges an initial fee of P5M for a franchise with P2M paid when the agreement is signed and the balance in three annual payments. The present value of the annual payments, discounted at 15% is P2,283,200. The franchisee has the right to purchase P750,000 winery equipment and barrels for P690,000. An additional part of the initial fee is advertising to be provided by NAPA during the next three years. The value of the advertising is P250,000 per annum. Collectability of the note is reasonably assured and NAPA has performed all the initial services stated in the contract. What is the amount of the revenue from franchise fee? a.3,473,200 b.4,223,200 c.4,940,000 d.3,533,200

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

NAPA WINERY charges an initial fee of P5M
for a franchise with P2M paid when the
agreement is signed and the balance in three
annual payments. The present value of the
annual payments, discounted at 15% is
P2,283,200. The franchisee has the right to
purchase P750,000 winery equipment and
barrels for P690,000. An additional part of the
initial fee is advertising to be provided by
NAPA during the next three years. The value
of the advertising is P250,000 per annum.
Collectability of the note is reasonably
assured and NAPA has performed all the
initial services stated in the contract. What is
the amount of the revenue from franchise
fee?
a.3,473,200
b.4,223,200
c.4,940,000
d.3,533,200

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