On January 2, 2016, Jose Miguel got the franchise of Figaro, Inc.. The franchise agreement provides a P500,000 initial franchise fee, payable P100,000 upon signing of the franchise contract and the balance in four annual installments starting December 31, 2016. A present value using 12% as discount rate, the four installments would approximate P199,650. The fees once paid are not refundable. The franchise may be cancelled subject to the provisions of the agreement. Should there be unpaid franchise fees attributed to the balance of the initial franchise fee, it would become due and demandable upon cancellation. Further, the franchisor is entitled to a 5% continuing fee on gross sales payable monthly within the first ten days of the following month. Metro Bank guaranteed the note issued by Jose Miguel. The first year of operations yielded gross sales of 9 million. On December 31, 2016, how much is the earned franchise fee? a. P950,000 b. P550,000 c. P749,650 d. P650,000
On January 2, 2016, Jose Miguel got the franchise of Figaro, Inc.. The franchise agreement provides a P500,000 initial franchise fee, payable P100,000 upon signing of the franchise contract and the balance in four annual installments starting December 31, 2016. A present value using 12% as discount rate, the four installments would approximate P199,650. The fees once paid are not refundable. The franchise may be cancelled subject to the provisions of the agreement. Should there be unpaid franchise fees attributed to the balance of the initial franchise fee, it would become due and demandable upon cancellation. Further, the franchisor is entitled to a 5% continuing fee on gross sales payable monthly within the first ten days of the following month.
Metro Bank guaranteed the note issued by Jose Miguel. The first year of operations yielded gross sales of 9 million.
On December 31, 2016, how much is the earned franchise fee?
a. P950,000
b. P550,000
c. P749,650
d. P650,000
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