Reference no: EM132708453

On January 01, 2018, CEE Company enters into a contract with a customer to transfer a license for a fixed fee of P1,000,000 payable as follows:

1. 20% is payable upon signing the contract.
2. 80% is represented by a note receivable in 4 equal annual instalments starting Dec 31, 2018. The appropriate discount rate is 12%. 
3. The license transfers to the customer on January 03, 2019. 
4. During 2018, CEE Company incurs direct costs of P200,000. 
5. Collectability of the note is reasonably assured. 
6. The license provides the customer with the right to use CEE's intellectual property as it exists at the point in time at which the license is granted.

Problem 1: How much is the amount of revenue recognized in 2018?

Problem 2: How much is the transaction price of the contract?

Problem 3: When will the revenue be recognized?

Problem 4: How much would CEE's Net Income (loss) in 2018 on that contract?

Problem 5: How much would CEE's net Income (loss) in 2019 on that contract?