On January 2, 2019, SD Company signed an agreement to operate as a franchisee of TQ Products, inc. for an initial franchise fee of P937,500 for 7 years. Of this amount, P175,000 was paid when the agreement was signed and the balance payable in four annual payments beginning on December 31, 2019. SD signed a non-interest bearing note for the balance. SD’s rating indicates that he can borrow money at 16% for the loan of this type. Assume that substantial services amounting to P283,500 had already been rendered by TQ Products and that additional indirect franchise cost of P25,500 was also incurred. PV factor is 2.80. If the collection of the note is not reasonably assured, the net income for the year ended December 31, 2019 is
On January 2, 2019, SD Company signed an agreement to operate as a franchisee
of TQ Products, inc. for an initial franchise fee of P937,500 for 7 years. Of this amount,
P175,000 was paid when the agreement was signed and the balance payable in four
annual payments beginning on December 31, 2019. SD signed a non-interest bearing
note for the balance. SD’s rating indicates that he can borrow money at 16% for the
loan of this type. Assume that substantial services amounting to P283,500 had
already been rendered by TQ Products and that additional indirect franchise cost of
P25,500 was also incurred. PV factor is 2.80.
If the collection of the note is not reasonably assured, the net income for the year
ended December 31, 2019 is
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