Question
On January 2, 2020, Star Co. signed an agreement to operate as a franchise of Constellation Co., initial fee of 3,000,000 for 3 years and
On January 2, 2020, Star Co. signed an agreement to operate as a franchise of Constellation Co., initial fee of 3,000,000 for 3 years and paid 500,000 of this amount when the contract was signed and the balance payable in four equal annual payments beginning on December 30, 2020. Star signed an interest-bearing note for the balance . Moon can borrow money at 20% for a loan of this type. Present value of an annuity of 1 for 4 periods at 24% is 2.4. Assume that additional indirect franchise cost of 68,000 was also incurred. What is the realized gross profit on December 31, 2020 if the collection of the note is not reasonably assured.
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