On January 1, 2021, a company obtained a franchise from a famous fast-food chain to sell for 20 years the fast-food's products. The initial franchise fee as agreed upon shall be P6,000,000: payable in cash of P1,000,000 when the contract is signed and the balance in four equal installments, thereafter, as evidenced by a non-interest-bearing note. The prevailing interest rate for this type of note is 12%. The agreement provides that the franchisor shall provide the necessary initial services required under a franchise contract. The agreement also provides that 5% of the revenue from the franchise must be paid to the franchisor. Revenue from the franchise for 2021 was P5,000,000. 1. How much is the initial cost of the franchise? a. P6.000,000 b. P4,796.625 c. P4,177.500 d. P3,796.625 2. How much is the total amount charged against revenues for the year 2021? a. P458.875 b. P239.831 c. P945.426 d. P489.831
On January 1, 2021, a company obtained a franchise from a famous fast-food chain to sell for 20 years the fast-food's products. The initial franchise fee as agreed upon shall be P6,000,000: payable in cash of P1,000,000 when the contract is signed and the balance in four equal installments, thereafter, as evidenced by a non-interest-bearing note. The prevailing interest rate for this type of note is 12%. The agreement provides that the franchisor shall provide the necessary initial services required under a franchise contract. The agreement also provides that 5% of the revenue from the franchise must be paid to the franchisor. Revenue from the franchise for 2021 was P5,000,000.
1. How much is the initial cost of the franchise?
a. P6.000,000
b. P4,796.625
c. P4,177.500
d. P3,796.625
2. How much is the total amount charged against revenues for the year 2021?
a. P458.875
b. P239.831
c. P945.426
d. P489.831
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