Starbeans Inc. operates and franchises coffee shops around the world. On January 1, 2020, Star beans Inc. entered into a franchise agreement with a franchisee. As part of its franchise agreement, Starbeans requires a franchisee to pay an initial franchise fee in the amount of P1,500,000 of which P500,000 is payable at the date of perfection of contract and the balance payable in five equal annual instalments every December 31. The franchisee issued a non-interest-bearing note with an effective interest rate of 10% for the balance of the initial franchise fee and the present value of the note is P758,157. The franchise agreement also provides for ongoing payment of royalties of 5% based on sales revenue of franchisee. As part of the franchise agreement, Starbeans provides pre-opening services, including supply and installation of coffee equipment and cash registers with a total cost of P754,894. Starbeans evaluates and determines that the contract with the customer is a single performance obligation that need not be separated. As of July 1, 2020, Mejobee already satisfied its performance obligation to supply and install coffee equipment and cash registers to the franchisee. For the year ended December 31, 2020, the franchisee reported sales revenue in the amount of P1,000,000.What is the net income to be reported by Starbeans for the year ended December 31, 2020, if the collection of the note receivable is reasonably assured? a.P503,263 b.P579,079 c.P553,263 d.P629,079
Starbeans Inc. operates and franchises coffee shops around the world. On January 1, 2020, Star beans Inc. entered into a franchise agreement with a franchisee. As part of its franchise agreement, Starbeans requires a franchisee to pay an initial franchise fee in the amount of P1,500,000 of which P500,000 is payable at the date of perfection of contract and the balance payable in five equal annual instalments every December 31. The franchisee issued a non-interest-bearing note with an effective interest rate of 10% for the balance of the initial franchise fee and the present value of the note is P758,157. The franchise agreement also provides for ongoing payment of royalties of 5% based on sales revenue of franchisee. As part of the franchise agreement, Starbeans provides pre-opening services, including supply and installation of coffee equipment and cash registers with a total cost of P754,894. Starbeans evaluates and determines that the contract with the customer is a single performance obligation that need not be separated. As of July 1, 2020, Mejobee already satisfied its performance obligation to supply and install coffee equipment and cash registers to the franchisee. For the year ended December 31, 2020, the franchisee reported sales revenue in the amount of P1,000,000.
What is the net income to be reported by Starbeans for the year ended December 31, 2020, if the collection of the note receivable is reasonably assured?
a.P503,263
b.P579,079
c.P553,263
d.P629,079
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