1. During March 31, 2016, Mr.

Gagala the owner of LUV Bakeshop entered into a

franchise agreement with Ms. Centino to operate using the name of the
bakeshop. Centino paid P900, 000 as down payment of the initial franchise
fee plus a notes receivable to be paid at P50, 000 every quarter starting June
30, 2016. As stated in the contract, 9 quarterly payment will be made by the
customer. For this type of borrowing, 12% discount rate per year is
applicable. LUV Bakeshop provided the initial and necessary services to
formally start the operation in August 1, 2016 at a cost of P515, 722. Indirect
cost of P19, 500 were incurred during the year. Starting August 1 to
December 31 the new store generate P560, 000 gross revenue. As per
agreement 12% of the annual gross sales will be given to LUV as
continuing franchise fee. The notes receivable is unlikely to be
collected. (Round off to 4 decimal places for present value factors and 2
decimal places for gross profit rate.)

a. How much is the realized gross profit for the year, if any?
b. If the notes receivable is unlikely to be collected, how much will be the net
income from the franchise should be recognized at the year end?

2. Information on sales activity of KempAraz Corp. are as follows:

2013 2014 2015
Sales on account P45, 000 P23, 000 P56, 000
Cost of on account sales 27, 000 13, 800 33, 600
Installment Sales 100, 000 120, 000 240, 000
Cost of Installment Sales 60, 000 66, 000 156, 000

Additional Information:

On account sales are collected within the year.

Installment sales are collected in the following manner: 10%- down
payment; balance- 20% on the year of sale; 40% year after date of
sale; 40% second year after date of sale.
Expenses for year 2013, 2014 and 2015- P12, 500, P15, 600, P34, 000
respectively.
Using installment sales method to compute the profit, how much is the
realized gross profit in year 2014 and 2015?