What is the carrying value of the franchise on december

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Question - On December 30, 2020, Boo Mull Leak Company obtained a franchise from Nana Tili Company to sell the latter's products for 20 years. The initial franchise fee as agreed upon shall be P10,000,000, payable in cash amounting to P1,000,000 when the contract is signed, and the balance in five equal annual installments every December 31 thereafter, as evidenced by a non-interest-bearing note. The agreement provides that the franchisor shall provide the necessary initial services required under a franchise contract. By the end of the year, the company has performed all the initial services which costed Nana Tili P1,497,728. (Assume that the franchisee could borrow money at 12%.)

How much should the franchise be initially recognized?

What is the carrying value of the franchise on December 31, 2023?

Reference no: EM133122818

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