Reference no: EM132891146

Question 1: On Jan. 1, 20x1, Knock Co. enters into a contract with a customer to transfer a license for a fixed fee of P100,000 payable as follows: 20% at contract inception and balance due in 4 equal annual installments starting Dec. 31, 20x1. The discount rate is 12%. At contract inception, Knock determines that there is significant uncertainty in the collectability of the note, and that the nature of the promise to grant the license is to provide the customer with the right to use Knock's intellectual property as it exists at grant date. Knock transfers the license to the customer, and incurs direct contract costs of P20,000, on Jan. 1, 20x1. How much contract revenue and contract costs are recognized and expensed, respectively, in 20x1