2. If the collection of the note receivable is reasonably assured, what is the net income to be reported by the entity for the year ended December 31, 2020? a. 98,850 b. 94,850 c. 70,028 d. 92,037 8907
2. If the collection of the note receivable is reasonably assured, what is the net income to be reported by the entity for the year ended December 31, 2020? a. 98,850 b. 94,850 c. 70,028 d. 92,037 8907
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter13: Investments And Long-term Receivables
Section: Chapter Questions
Problem 10MC: On January 1, 2019, Park Company accepted a 36,000, non-interest-bearing, 3-year note from a major...
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Transcribed Image Text:2. If the collection of the note receivable is reasonably assured, what is the net income to be
reported by the entity for the year ended December 31, 2020?
a. 98,850
b. 94,850
c. 70,028
d. 92,037
8907
Transcribed Image Text:2. On January 1, 2020, an entity granted a franchise agreement to a franchisee. The contract provided
that the franchisee shall pay an initial franchise fee of P500,000 and on-going payment of royalties
equivalent to 8% of the sales of the franchisee.
On January 1, 2020, the franchisee paid down payment of P200,000 and issued a 3-year noninterest
bearing note for the balance payable in three equal annual installments starting December 31, 2020.
The note has present value of P240,183 with effective interest rate of 12%.
On June 30, 2020, the entity completed the performance obligation of the franchise at a cost of
P352,146. Aside from that, the entity incurred indirect cost of P22,009.
The franchisee started operation on July 1, 2020 and reported sales revenue amounting to P50,000
for the year ended December 31, 2020. The franchisee paid the first installment on its due date.
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