Question
On January 1, 2014 SUKARAP COMPANY sells a franchise to Mr. Budots for an initial franchise fee of P 4,000,000. Upon signing the contract on
On January 1, 2014 SUKARAP COMPANY sells a franchise to Mr. Budots for an initial franchise fee of P 4,000,000. Upon signing the contract on the same day, Mr. Budots paid 50% of the said amount and the balance shall be paid in 5 annual equal installments starting December 31, 2014. Mr. Budots issued an interest-bearing note for the said balance with interest rate of 10%. (Assume that the cost of initial franchise fee amounted to P 3,000,000)
How much is the franchise revenue if the franchiser has substantially performed all the services required by the initial franchise fee, the down payment is non-refundable and the collection of the note is reasonably assured?(5%)
How much is the realized gross profit in the initial franchise if the down payment is non-refundable, the collectability of the note is not reasonably assured and the franchiser has performed all the services required? (5%)
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