Reference no: EM133188979
Question 1 - On January 1, 2021, Gringo Company had capitalized cost of P5,000,000 for a new computer software product with an economic life of 5 years. Sales for 2021 amounted to P3,000,000. The total sales of software over its economic life are expected to be P10,000,000. The pattern of future sales cannot be measured reliably. On December 31, 2021, the software had a net realizable value of P4,500,000. What is the carrying amount of the computer software on December 31, 2021?
Question 2 - On January 1, 2021, Risa signed an agreement to operate as a franchisee of Teddy Company for an initial franchise fee of P12,000,000. The same date, Risa paid P4,000,000 and agreed to pay the balance in four equal annual payments of P2,000,000 beginning January 1, 2022. The down payment is not refundable, and no future services are required of the franchisor. Risa can borrow at 14% for a loan of this type. Present and future value factors are as follows:
Present value of 1 at 14% for 4 periods 0.59
Future amount of 1 at 14% for 4 periods 1.69
Present value of an ordinary annuity of 1 at 14% for 4 periods 2.91
What is the acquisition cost of the franchise?
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