PROBLEM 3 On January 1, 2022, Entity A granted a franchise right to franchisee for the operation of selling automobile parts. Entity A also granted the franchisee the right to access its trade name for a period of 10 years. The franchisee is required to pay an upfront non- refundable initial franchise fee of P20,000,000 and a continuing franchise fee of 10% of the annual sales. It is the obligation of Entity A to construct the franchise stall and to deliver 10,000 units of automobile parts to the franchisee. Stand-alone selling prices Trade-name Construction of the stall directly observable directly observable Not Not Delivery of 10,000 units of automobile parts P4,000,000 The stall had an estimated cost of P4,000,000 with a margin of P6,000,000. Since it is the first time Entity A to granted access to its trade name, Entity A has not yet established a price for that service. On October 1, 2022, Entity already finished the construction of the stall and as of December 31, 2022, Entity A only delivered 3,500 units of automobile parts. The franchisee reported sales revenue on December 31, 2022, in the amount of P1,500,000.