On April 1, 2016, KFC, Inc. entered into franchise agreement authorizing Ms. Manalo to operate as a franchisee for an initial franchise fee of P1,209,375 payable as follows: P590,625 cash to be paid upon signing of the franchise contract and the balance in five equal annual payment every December 31 starting 2016. Ms. Manalo issued 12% interest bearing note for the balance. The agreement further provides that the franchisee must pay a continuing franchise fee equal to 5% of its monthly gross sales. If the collectability of the note receivable issued by Ms. Manalo is doubtful, how much is the net income on December 31, 2016? a. P 11,137.50 b. P601,762.50 c. P 590,625 d. P1,209,375
On April 1, 2016, KFC, Inc. entered into franchise agreement authorizing Ms. Manalo to operate as a franchisee for an initial franchise fee of P1,209,375 payable as follows: P590,625 cash to be paid upon signing of the franchise contract and the balance in five equal annual payment every December 31 starting 2016. Ms. Manalo issued 12% interest bearing note for the balance. The agreement further provides that the franchisee must pay a continuing franchise fee equal to 5% of its monthly gross sales. If the collectability of the note receivable issued by Ms. Manalo is doubtful, how much is the net income on December 31, 2016? a. P 11,137.50 b. P601,762.50 c. P 590,625 d. P1,209,375
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
On April 1, 2016, KFC, Inc. entered into franchise agreement authorizing Ms. Manalo to operate as a franchisee for an initial franchise fee of P1,209,375 payable as follows: P590,625 cash to be paid upon signing of the franchise contract and the balance in five equal annual payment every December 31 starting 2016. Ms. Manalo issued 12% interest bearing note for the balance. The agreement further provides that the franchisee must pay a continuing franchise fee equal to 5% of its monthly gross sales.
If the collectability of the note receivable issued by Ms. Manalo is doubtful, how much is the net income on December 31, 2016?
a. P 11,137.50
b. P601,762.50
c. P 590,625
d. P1,209,375
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