Question
DEF, franchisor, entered into a franchise agreement with WXY, franchisee, on July 1, 2020. The total franchise fee agreed upon is P550,000, of which P50,000
DEF, franchisor, entered into a franchise agreement with WXY, franchisee, on July 1, 2020. The total franchise fee agreed upon is P550,000, of which P50,000 is payable upon signing and the balance is covered by a non-interest bearing note payable in four equal annual installments. It was agreed that the down payment is not refundable. The direct franchise cost incurred was P325,000. The management of WXY has estimated that they can borrow a loan of this type at the rate of 12%. The franchisee commenced its operations on July 31, 2020. The contract provides that the franchisee has the right to use the entitys intellectual property as it exists at the point in time at which the franchise is granted.
- How much is the net income (loss) to be reported on July 31, 2020? (use two decimal places for the PV factor)
- Assuming the collection is not reasonably assured. The net income (loss) on July 31, 2020 will be?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started