The franchisor charges an initial franchise fee of P110,000 broken down as follows: Right to trade name, market, know-how P 50,000 Training services 20,000 Equipment (Cost of P10,800)
The franchisor charges an initial franchise fee of P110,000 broken down as follows: Right to trade name, market, know-how P 50,000 Training services 20,000 Equipment (Cost of P10,800)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The franchisor charges an initial franchise fee of P110,000 broken down as follows:
| Right to trade name, market, know-how | P 50,000 |
| Training services | 20,000 |
| Equipment (Cost of P10,800) | 40,000 |
| Total initial franchise fee | P110,000 |
Upon signing of the agreement, a payment of P70,000 is due. Thereafter, two annual payments of P30,000 are required. The credit rating of the franchisee is such that it would have to pay interest of 8% to borrow money. The franchise agreement is signed on August 1, 2019, and the franchise commences operation on November 1, 2019. Assuming that no future services are required by the franchisor once the franchise begins operations, determine the net income reported on December 31, 2019.
a. 99,200
b.125,180
c. 114,380
d. 112,600
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