On January 2, 2019, Ivan got the franchise of PPP Inc. The franchise agreement provides a P500,000 initial franchise fee, payable P100,000 upon signing of the franchise contract and the balance in 4 annual installments starting December 31, 2019. At 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. The first year of operations yielded gross sales of P9milion. Assume the collectability of the note is assured. What is the earned franchise fee on Dec. 31, 2019?
On January 2, 2019, Ivan got the franchise of PPP Inc. The franchise agreement provides a P500,000 initial franchise fee, payable P100,000 upon signing of the franchise contract and the balance in 4 annual installments starting December 31, 2019. At 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. The first year of operations yielded gross sales of P9milion. Assume the collectability of the note is assured. What is the earned franchise fee on Dec. 31, 2019?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On January 2, 2019, Ivan got the franchise of PPP Inc. The franchise agreement provides a P500,000 initial franchise fee, payable P100,000 upon signing of the franchise contract and the balance in 4 annual installments starting December 31, 2019. At 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. The first year of operations yielded gross sales of P9milion.
Assume the collectability of the note is assured.
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. The first year of operations yielded gross sales of P9milion.
Assume the collectability of the note is assured.
What is the earned franchise fee on Dec. 31, 2019?
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