1.If the collection of the long-term note received as consideration for initial services rendered by Franchisor to Franchisee is unlikely but not remote, what method shall be used by the franchisor to recognize gross profit from initial franchise fee revenue?

A. Accrual basis

B. Cost recovery method

C. Installment method

D. Percentage of completion method

On November 1, 2020, Cebu Express Motors which maintains a perpetual inventory records sold a new automobile to Speedex for P6,120,000. The cost of the car to the seller was P4,684,500. The buyer paid 30% down and received P576,000 allowance on an old car traded, the balance being paid in equal monthly instalment payments commencing the month of sale.

The monthly amortization was P216,000 inclusive of 12% interest and unpaid amount of the obligation. The car tradedin has a wholesale value of P864,000 after expending reconditioning cost of P162,000

After paying three installments, the buyer defaulted, and the car was subsequently repossessed. When reacquired, the car was appraised to have a fair value of P2,160.000

2. How much is the realized gross profit on installment sales during 2020?

Eveready Co. sells heavy-duty batteries, which cost P7,000, at a total installment price of P12,000. A regular customer buys a unit and trades in his old unit for an allowance of P2,500. Eveready spends P250 to recondition each unit traded in and then sells them at P3,250 each. A profit of 20% results from the sale of used batteries.

3. What was the trade-in over-allowance granted to the customer?