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What is the carrying value of the franchise to be reported

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Problem 1: On July 1, 2019, Flat Co. Signed an agreement to operate as a franchise of Tire Co. for an initial franchise fee of P1,200,000. On the same date, Flat paid P400,000 and agreed to pay the balance in four equal payments of P200,000 beginning July 1, 2020. The down payment is not refundable and no future services are required of the franchisor. Flat can borrow at 14% for a loan of this type. What is the carrying value of the franchise to be reported on the December 31, 2021 statement of financial position assuming the franchise has a definite life of 20 years?

Option 1: 982,800
Option 2: 859,950
Option 3: 1,110,000
Option 4: 1,352,000

Reference no: EM132784997

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