On November 30, 2022
1.)
On November 30, 2022, Loveless Company authorized NBSB Corp. to operate as a franchisee for an initial franchise fee of P1,950,000. Of his amount, P750,000 was received upon signing the agreement, and the balance, represented by a note, is due in four annual payments starting November 30, 2023. Present value of P1 at 12% for 4 periods is 0.6355. Present value of an ordinary annuity of P1 at 12% for 4 periods is 3.0374. The period of refund will elapse on January 31, 2023. The franchisor has performed substantially all the initial services, but the operations of the store have yet to start. Collectability of the note is reasonably certain.
Required:
a.) How much is the unearned franchise fee on the year ended December 31, 2022?
b.) How much is the earned franchise fee for the year ended December 31, 2022?
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