ABC, a franchisor, whose fiscal year ends on July 31, entered into franchise

agreement with DEF, a franchisee, on July 1, 2017. The total franchise fee agreed

upon is 550,000; 50,000 is payable when the contract is signed and a noninterest

bearing note requiring four equal annual installments for the balance. It

was agreed that the down payment is not refundable notwithstanding lack of

substantial performance of services by the franchisor. The direct franchise cost

incurred was 325,000 while indirect franchise expense of 31,250 was also

incurred. The management of DEF has estimated that they can borrow a loan of

this at the rate of 12%. The franchise commenced its operations on July 31,

2017. How much is the net income (loss) to be reported by ABC? (use PV factor

of 3.04)