On January 1, 20x8, Jolybee Corporation sold a franchise to Mr. AMG for P10,000,000 for the right to operate as a franchisee of Jolybee Corporation. Terms of the franchise contract were: 1. The initial franchise fee of P1,000,000 is payable in cash, when the contract is signed and the balance in five equal instalment every december 31, evidenced by a 12% promissory note. 2. The franchisor will assist in locating the site, supervise construction activity and training of management and employees. On December 31, 20x8 direct cost of services rendered to the franchisee amounted to P2,000,000. Assuming that there is substantial performance of services required in the contract and the collectability of the note receivable is not reasonably assured, using the instalment method how much net income is to be recognized by Jolybee on December 31, 20x8?
On January 1, 20x8, Jolybee Corporation sold a franchise to Mr. AMG for P10,000,000 for the right to operate as a franchisee of Jolybee Corporation. Terms of the franchise contract were: 1. The initial franchise fee of P1,000,000 is payable in cash, when the contract is signed and the balance in five equal instalment every december 31, evidenced by a 12% promissory note. 2. The franchisor will assist in locating the site, supervise construction activity and training of management and employees. On December 31, 20x8 direct cost of services rendered to the franchisee amounted to P2,000,000. Assuming that there is substantial performance of services required in the contract and the collectability of the note receivable is not reasonably assured, using the instalment method how much net income is to be recognized by Jolybee on December 31, 20x8?
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