How much contract revenue will krabs recognize

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On December 31, 20x1, Mr. Eugene H. Krabs Co. enters into a contract with Sheldon J. Plankton Co. to transfer a license for a fixed fee of P100,000 payable as follows:

  • 20% upon signing of contract.
  • 80% in 4 equal annual installments starting December 31, 20x2. The appropriate discount rate is 12%.

Problem 1: The license provides Plankton rights over Mr. Krabs' patented secret formula for a burger patty. Plankton continues to operate using its trade name and has the discretion of developing a new product name for the products it will produce using the secret formula. The license does not explicitly require Mr. Krabs to undertake activities that will significantly affect the intellectual property to which Plankton has rights. Neither does Plankton expect that Mr. Krabs will undertake such activities. Mr. Krabs provides the secret formula to Plankton on December 31, 20x1. How much contract revenue will Krabs recognize in 20x1?

a. 60,747

b. 79,132

c. 80,747

d. 0

Reference no: EM132891150

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