Part II: Problem Solving 1. On January 1, 2016, Mr. Joven entered into a franchise agreement with ONG to market their products. The agreement provides for an initial fee of P12,500,000 payable as follow: P3,500,000 to be paid upon signing of the contract and the balance in five equal annual payments every end of the year starting December 31, 2016. Mr. Joven signs a non-interest bearing note for the balance. His credit rating indicates that he can borrow money 15% interest for a loan of this type. The present value of an annuity of P1 at 15% for 5 periods is 3.352. the agreement further provides that the franchise must pay a continuing franchise fee equal to 3% of the monthly gross sales. On August 31, the franchisor completed the initial services required in the contract at a cost of P4,290,120 and incurred indirect cost of P175,000. The franchisee commenced business operations on November 30, 2016. The gross sales reported to the franchiser were P1,800,000 for December, 2016. The first installment payment was made in due date. 1. Assume the collectability of the note is not reasonably assured, how much is the net income for the year ended, December 31, 2016? a. 3.126.268 b. 3.201.268 c. 3.417.268 d. 3,072,268