On January 1, 2017, Franchise BB entered into a franchise agreement with Franchisor AA to sell...

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On January 1, 2017, Franchise BB entered into a franchise agreement with Franchisor AA to sell their products. The agreement provides for initial franchise fee of P6, 250,000, payable as follows: Cash down payment Balance, 12% promissory notes Total P1, 750,000 P4, 500,000 P6, 250,000 The note is to be paid in four equal annual payments every December 31, starting on December 31, 2017. The agreement further provides that BB must pay a continuing fee equal to 5% of its monthly gross sales. On August 31, AA completed the initial services required in the contract at a cost of P2, 125,000, and also incurred indirect costs of P380, 000. BB commenced business operations on September 1, 2017. Gross sales by BB from September 1 to December 1, 2017 was P631, 300. The first installment payment was made on due date. 2. How much is AA's realized gross profit for 2017 assuming the collectibility of the note is not reasonably assured. On January 1, 2017, Franchise BB entered into a franchise agreement with Franchisor AA to sell their products. The agreement provides for initial franchise fee of P6, 250,000, payable as follows: Cash down payment Balance, 12% promissory notes Total P1, 750,000 P4, 500,000 P6, 250,000 The note is to be paid in four equal annual payments every December 31, starting on December 31, 2017. The agreement further provides that BB must pay a continuing fee equal to 5% of its monthly gross sales. On August 31, AA completed the initial services required in the contract at a cost of P2, 125,000, and also incurred indirect costs of P380, 000. BB commenced business operations on September 1, 2017. Gross sales by BB from September 1 to December 1, 2017 was P631, 300. The first installment payment was made on due date. 2. How much is AA's realized gross profit for 2017 assuming the collectibility of the note is not reasonably assured.

Answer rating: 100% (QA)

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