Diva Who In
Diva Who Inc., franchisor, entered into a franchise agreement with Mawie Company on January 1, 2018. The initial franchise fee agreed upon is P950,000, of which, P150,000 is payable upon signing and the balance to be covered by a non-interest bearing note payable in four equal annual installment to be paid starting December 31, 2018. It was agreed that the down payment is not refundable and royalties equal to 5% of its average sales every calendar year must be paid to Diva Who.
The following expenses were incurred:
Initial services:
Direct cost-P 331,200
Indirect cost-41,400
Continuing services:
Direct cost-P66,240
Indirect cost-16,560
The management of Mawie estimated that they can borrow at the rate of 7%; probability of collection is unlikely. The franchisee commenced its operations on June 30,2018. Mawie reported monthly average sales of P80,000 since the start of its operations.
The total revenue to be recognized by Diva Who Inc. for the year ended December 31, 2018 is?
how much is the net income to be reported by Diva Who Inc. on December 31, 2018?
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