PROBLEM 7 APOL charges an initial franchise fee of P1,600,000, requiring a P320,000 down payment when the agreement is signed and the balance is accounted in four annual payments. The present value of the annual payments, discounted at 10% is P1,014,000. An additional part of the initial franchise fee is for advertising to be provided by APOL for the next five years. The value of advertising is P1,000 a month. Collectability of the payment is reasonably assured and APOL has performed all the initial services required by the contract. How much revenue from the franchise fee is to be recognized when the agreement is signed? RUBRICS 5 POINTS EACH - CORRECT ANSWERS WITH SOLUTION