CHAPTER 7

SUGGESTED ANSWERS

Exercise 7-1

1. 2010 2011 2012

Contract price P50,000,000 P50,000,000 P50,000,000
Cost incurred to date P 7,500,000 P34,500,000 P40,800,000
Est. cost to complete 30,000,000 8,625,000 -
__________
Total estimated cost 37,500,000 P43,125,000 P40,800,000
Total estimated gross profit P12,500,000 P 6,875,000 P 9,200,000
Percentage of completion 20% 80% 100%

To Date Recognized in prior year/s To be recognized this year

2010 - Recognized revenue P10,000,000 - P10,000,000
Cost of revenue 7,500,000 - 7,500,000
Gross profit P 2,500,000 - P 2,500,000

2011 - Recognized revenue P40,000,000 P10,000,000 P30,000,000

Cost of revenue 34,500,000 7,500,000 27,000,000
Gross profit P 5,500,000 P 2,500,000 P 3,000,000

2012 - Recognized revenue P50,000,000 P40,000,000 P10,000,000

Cost of revenue 40,800,000 34,500,000 6,300,000
Gross profit P 9,200,000 P 5,500,000 P 3,700,000

2. 2010 2011 2012

a. Construction in progress 7,500,000 27,000,000 6,300,000
Cash, Materials, etc. 7,500,000 27,000,000 6,300,000

b. Accounts Receivable 8,000,000 36,000,000 6,000,000

Progress Billings on Const. Contracts 8,000,000 36,000,000 6,000,000
AA1 - Chapter 7 (2012 edition) page 144

c. Cash 5,500,000 33,000,000 11,500,000

Accounts Receivable 5,500,000 33,000,000 11,500,000

d. Cost of LTCC 7,500,000 27,000,000 6,300,000

Construction in Progress 2,500,000 3,000,000 3,700,000
Revenue from LTCC 10,000,000 30,000,000 10,000,000

e. Progress Billings on
Construction Contracts 50,000,000
Construction In Progress 50,000,000

3.
Statement of Financial Position
Current Assets:
Accounts Receivable P5,500,000

Current Liabilities:
Progress Billings on Construction Contracts P44,000,000
Less Construction in Progress 40,000,000 P4,000,000

Exercise 7-2
2010 2011 2012
a. Construction in Progress 32,000,000 43,000,000 15,500,000
Cash, Materials, etc. 32,000,000 43,000,000 15,500,000

b. Accounts Receivable 33,000,000 45,000,000 22,000,000

Progress Billing on Const. Contract 33,000,000 45,000,000 22,000,000

c. Cash 31,000,000 40,000,000 29,000,000

Accounts Receivable 31,000,000 40,000,000 29,000,000

d. Cost of LTCC 23,000,000 45,250,000 22,250,000

Construction in Progress 2,000,000 4,750,000 2,750,000
Revenue from LTCC 25,000,000 50,000,000 25,000,000
AA1 - Chapter 7 (2012 edition) page 144

e. Progress Billing on Const. Contracts 100,000,000

Construction in Progress 100,000,000

2010 2011 2012

Contract price P100,000,000 P100,000,000 P100,000,000
Cost incurred to date P 32,000,000 P 75,000,000 P 90,500,000
Estimated cost to complete 60,000,000 16,000,000 ___________
Total estimated cost P 92,000,000 P 91,000,000 P 90,500,000
Total estimated gross profit P 8,000,000 P 9,000,000 P 9,500,000
Percentage of completion 25% 75% 100%

To date Recognized in prior year/s To be recognized this year

2010 - Recognized revenue P25,000,000 - P25,000,000
Cost of revenue 23,000,000 - 23,000,000
Gross profit P 2,000,000 - P 2,000,000

2011 - Recognized revenue P75,000,000 P25,000,000 P50,000,000

Cost of revenue 68,250,000 23,000,000 45,250,000
Gross profit P 6,750,000 P 2,000,000 P 4,750,000

2012 - Recognized revenue P100,000,000 P75,000,000 P25,000,000

Cost of revenue 90,500,000 68,250,000 22,250,000
Gross profit P 9,500,000 P 6,750,000 P 2,750,000

Exercise 7-3

1. Contract price P25,000,000

Total estimated cost:
Cost incurred to date P 4,400,000
Estimated cost to complete 15,600,000 20,000,000
Total estimated gross profit P 5,000,000
Percentage of completion ( P 4,400,000/20,000,000) 22%
Gross profit to be recognized in 2012 P 1,100,000
AA1 - Chapter 7 (2012 edition) page 145

2. Accounts Receivable (P25,000,000 x 30% x 10%) P 750,000

Construction in Progress (P4,400,000 + P1,100,000) P5,500,000
Progress Billings on Construction Contracts (P25,000,000 x 30%) P7,500,000

Exercise 7-4
2010 2011 2012
Contract price P35,000,000 P35,000,000 P35,000,000
Cost incurred to date P17,500,000 P29,250,000 P31,000,000
Estimated cost to complete 10,500,000 3,250,000 -
Total estimated cost P28,000,000 P32,500,000 P31,000,000
Total estimated gross profit P 7,000,000 P 2,500,000 P 4,000,000
Percentage of completion 62.5% 90% 100%

To date Recognized in prior year/s To be recognized this year

2010 - Recognized revenue P21,875,000 - P21,875,000
Cost of revenue 17,500,000 - 17,500,000
Gross profit P 4,375,000 P 4,375,000

2011 - Recognized revenue P31,500,000 P21,875,000 P 9,625,000

Cost of revenue 29,250,000 17,500,000 11,750,000
Gross profit P 2,250,000 P 4,375,000 P(2,125,000)

2012 - Recognized revenue P35,000,000 P31,500,000 P 3,500,000

Cost of revenue 31,000,000 29,250,000 1,750,000
Gross profit P 4,000,000 P 2,250,000 P 1,750,000

2. Journal entries 2010 2011 2012

a. Construction in Progress 17,500,000 11,750,000 1,750,000
Cash, Materials, etc. 17,500,000 11,750,000 1,750,000

b. Accounts Receivable 16,000,000 12,000,000 7,000,000

Progress Billing on
Const. Contracts 16,000,000 12,000,000 7,000,000
c. Cash 15,000,000 10,000,000 10,000,000
Accounts Receivable 15,000,000 10,000,000 10,000,000
AA1 - Chapter 7 (2012 edition) page 147

d. Cost of LTCC 17,500,000 11,750,000 1,750,000

Construction in Progress 4,375,000 1,750,000
Construction in Progress 2,125,000
Revenue from LTCC 21,875,000 9,625,000 3,500,000

e. Progress Billing on Const. Contract 35,000,000

Construction in Progress 35,000,000

3. To date Recognized in prior year/s To be recognized this year

2010 - Recognized revenue P17,500,000 - P17,500,000
Cost of revenue 17,500,000 - 17,500,000
Gross profit - - -
========== ============ ==========

2011 - Recognized revenue P31,500,000 P17,500,000 P14,000,000

Cost of revenue 29,250,000 17,500,000 11,750,000
Gross profit P 2,250,000 ---------------- P 2,250,000

2012 - Recognized revenue P35,000,000 P31,500,000 P3,500,000

Cost of revenue 31,000,000 29,250,000 1,750,000
Gross profit P 4,000,000 P 2,250,000 P1,750,000

Exercise 7-5

Revenue recognized in 2012 (P26,000,000 x 40%) P10,400,000

Gross profit/income recognized in 2012 (P3,120,000 - P1,300,000) 1,820,000
Cost incurred in 2012 P 8,580,000

Exercise 7-6
Binondo Project Pasig Project
Revenue (CP x % of work done in 2011) P12,000,000 P1,290,000
Cost of revenue 12,400,000 1,400,000
Gross profit (loss) P (400,000) P( 110,000)
AA1 - Chapter 7 (2012 edition) page 148

Exercise 7-7
1. Contract revenue/price P40,000,000
Less Total profit 3,200,000
Total cost incurred P36,800,000
Less Cost incurred in 2010 and 2012 23,600,000
Cost incurred in 2011 P13,200,000

2. Gross profit to date, Dec.31, 2011 P 3,600,000

Cost incurred to date, Dec.31, 2011 (P7,200,000 + P13,200,000) 20,400,000
Revenue to date, Dec.31, 2011 P24,000,000
Percentage-of-completion (24,000,000/40,000,000) 60%

3. Gross profit to date, Dec.31, 2011 P3,600,000

Percentage of completion ÷ 60%
Total estimated gross profit P6,000,000

4. Contract price P40,000,000

Less Total estimated gross profit 6,000,000
Total estimated cost P34,000,000
Less Cost incurred to date 20,400,000
Estimated cost to complete P13,600,000

Exercise 7-8
Cash 500,000
Notes Receivable 1,000,000
Discount on Notes Receivable 207,540
Unearned Franchise Fees 1,292,460

Exercise 7-9
1. Cash 4,000,000
Notes Receivable 3,000,000
Discount on Notes Receivable 513,200*
Unearned Franchise Fees 6,486,800
*P3,000,000 - (2.4868 x P1000,000)
AA1 - Chapter 7 (2012 edition) page 149

2. Cash 4,000,000
Notes Receivable 3,000,000
Discount on Notes Receivable 513,200
Revenue from Franchise Fees 6,486,800

3. Cash 4,000,000
Unearned Franchise Fees 4,000,000

4. Cash 4,000,000
Notes Receivable 3,000,000
Discount on Notes Receivable 513,200
Revenue from Franchise Fees 4,000,000
Unearned Franchise Fees (1,000,000 x 2.48685) 2,486,800

Exercise 7-10
2011
July 1 –Cash 1,200,000
Notes Receivable 3,200,000
Discount on Notes Receivable 644,100
Unearned Franchise Fee 3,735,900
P800,000 x 3.1699 = P2,535,900
P3,200,000 - P2,535,900 = P664,100

Sept. 1 - Deferred Franchise Cost 100,000

Cash 100,000

Nov. 15 - Deferred Franchise Cost 60,000

Cash 60,000

Dec. 31 - Discount on Notes Receivable 126,795

Interest Revenue 126,795
P2,535,900 x 10% x 6/12 = P126,795
2012
Jan. 10 - Deferred Franchise Cost 100,000
Cash 100,000
AA1 - Chapter 7 (2012 edition) page 150

15 - Unearned Franchise Fee 3,735,900

Franchise Fee Revenue 3,735,900

15 - Cost of Franchise Fee Revenue 260,000

Deferred Franchise Cost 260,000

July 1 – Cash 800,000

Notes Receivable 800,000

1 - Discount on Notes Receivable 126,795

Interest Revenue 126,795

Problem 7-1
2011 2012
a. Construction in Progress 11,000,000 4,800,000
Cash, Materials, etc. 11,000,000 4,800,000

b. Accounts Receivable 10,800,000 9,200,000

Progress Billing on Const. Contract 10,800,000 9,200,000

c. Cash 10,000,000 10,000,000

Accounts Receivable 10,000,000 10,000,000

d. Cost of LTCC 11,000,000 4,800,000

Construction in Progress 2,750,000 1,450,000
Revenue from LTCC 13,750,000 6,250,000

e. Progress Billing on Construction Contracts 20,000,000

Construction in Progress 20,000,000

Problem 7-2
Income Statement
Revenue from LTCC: 2011 P2,750,000
2012 1,450,000
AA1 - Chapter 7 (2012 edition) page 151

Statement of Financial Position

Receivables: 2011 P 800,000
2012 -
Inventory - CIP, net of billings
2011 (13,750,000 - 10,800,000) P2,950,000
2012 -
Problem 7-3
Year Income (loss) Recognized Rec’l ending balance CIP Invty. ending balance Cost in excess of billings
2010 10,000,000 3,800,000 50,000,000 12,000,000
2011 10,000,000 9,400,000 120,000,000 26,000,000
2012 10,000,000 - - -

2010 2011 2012

Contract price P150,000,000 P150,000,000 P150,000,000
Cost incurred to date P 40,000,000 P100,000,000 P120,000,000
Estimated cost to complete 80,000,000 25,000,000 ----------------
Total estimated cost P120,000,000 P125,000,000 P120,000,000
Total estimated gross profit P 30,000,000 P 25,000,000 P 30,000,000
Percentage of completion 33 1/3% 80% 100%
Gross profit to date P 10,000,000 P 20,000,000 P 30,000,000
Less Gross profit recognized in prior year/s _____-______ 10,000,000 20,000,000
Gross profit to be recognized this year P 10,000,000 P 10,000,000 P 10,000,000
Problem 7-4
PROJECT A PROJECT B PROJECT C PROJECT D
2011 2012 2011 2012 2011 2012 2012
Contract price P29,000,000 P29,000,000 P34,000,000 P34,000,000 P17,000,000 P17,000,000 P2,000,000
Cost incurred to date P16,800,000 P26,400,000 P14,400,000 P21,200,000 P 3,200,000 P11,830,000 P 5,600,000
Estimated cost to complete 11,200,000 ------------- 17,600,000 13,000,000 9,600,000 1,170,000 10,400,000
Total estimated cost P28,000,000 P26,400,000 P32,000,000 P34,200,000 P12,800,000 P13,000,000 P16,000,000
Total estimated gross profit (loss) P 1,000,000 P 2,600,000 P 2,000,000 P( 200,000) P 4,200,000 P 4,000,000 P 4,000,000
Percentage of completion 60% 100% 45% 25% 91% 35%
Gross profit (loss) to date P 600,000 P 2,600,000 P 900,000 P( 200,000)* P 1,050,000 P 3,640,000 P 1,400,000
Less gross profit recognized in prior year ------- 600,000 ------ 900,000 ---- 1,050,000 -----
Gross profit - current year P 600,000 P 1,000,000 P 900,000 P(1,100,000) P 1,050,000 P 2,590,000 P 1,400,000
* The entire loss should be recognized immediately
AA1 - Chapter 7 (2012 edition) page 152

(1) Percentage of completion method

2011 2012
Gross profit P2,550,000 P3,890,000
Operating expenses 1,200,000 1,200,000
Net income P1,350,000 P2,690,000

Problem 7-5
1. (a) 2010 2011 2012 2013
Contract price P1,200,000,000 P1,200,000,000 P1,200,000,000 P1,200,000,000
Cost incurred to date P 240,000,000 P605,000,000 P900,000,000 P1,050,000,000
Estimated cost to complete 760,000,000 495,000,000 100,000,000 --------
Total estimated cost P1,000,000,000 P1,100,000,000 P1,000,000,000 P1,050,000,000
Total estimated gross profit P 200,000,000 P 100,000,000 P 200,000,000 P 150,000,000

Percentage of completion 24% 55% 90% 100%

Recognized in To be recognized
To date prior year in current year
2010-Revenue P288,000,000 ------ P288,000,000
Cost of revenue 240,000,000 ------ 240,000,000
Gross profit P 48,000,000 ------ P 48,000,000

Recognized in To be recognized
To date prior year in current year
2011-Revenue P660,000,000 P288,000,000 P372,000,000
Cost of revenue 605,000,000 240,000,000 365,000,000
Gross profit P 55,000,000 P 48,000,000 P 7,000,000

Recognized in To be recognized
To date prior year in current year
2012-Revenue P1,080,000,000 P660,000,000 P420,000,000
Cost of revenue 900,000,000 605,000,000 295,000,000
Gross profit P 180,000,000 P 55,000,000 P125,000,000
AA1 - Chapter 7 (2012 edition) page 153

Recognized in To be recognized
To date prior year in current year
2013-Revenue P1,200,000,000 P1,080,000,000 P 120,000,000
Cost of revenue 1,050,000,000 900,000,000 150,000,000
Gross profit P 150,000,000 P 180,000,000 P( 30,000,000)

2. 2010 2011 2012 2013

a Construction in Progress 240,000,000 365,000,000 295,000,000 150,000,000
Cash, Materials, etc. 240,000,000 365,000,000 295,000,000 150,000,000

b. Accounts Receivable 260,000,000 310,000,000 340,000,000 290,000,000

Progress Billings on Const. Contract 260,000,000 310,000,000 340,000,000 290,000,000

c. Cash 240,000,000 270,000,000 300,000,000 300,000,000

Accounts Receivable 240,000,000 270,000,000 300,000,000 300,000,000

d. Cost of LTCC 240,000,000 365,000,000 295,000,000 150,000,000

Construction in Progress 48,000,000 7,000,000 125,000,000 30,000,000
Construction in Progress 120,000,000
Revenue from LTCC 288,000,000 372,000,000 420,000,000

e. Progress Billings on Const. Contracts 1,200,000,000

Construction in Progress 1,200,000,000

Problem 7-6
2010 2011 2012
Contract price P14,000,000 P14,000,000 P13,000.000
Cost incurred to date P 5,000,000 P11,475,000 P12,295,000
Estimated cost to complete 7,500,000 1,275,000 -------
Total estimated cost P12,500,000 P12,750,000 P12,295,000
Total estimated gross profit P 1,500,000 P 1,250,000 P 705,000
Percentage of completion 40% 90% 100%
Gross profit to date P 600,000 P 1,125,000 P 705,000
Less Gross profit recognized in prior year ------ 600,000 1,125,000
Gross profit - current year P 600,000 P 525,000 P (420,000)
AA1 - Chapter 7 (2012 edition) page 154

Problem 7-7
2010 2011 2012 Total
1. Recognized revenue P 11,000,000 P13,000,000 (2) P11,000,000 (3) P35,000,000
Cost of revenue 10,000,000 12,500,000 11,500,000 (4) 34,000,000 (5)
Gross Profit (loss) P 1,000,000 (1) P 500,000 P (500,000) P 1,000,000

2010 2011
2. Contract-price P35,000,000 P35,000,000
Cost incurred to date P10,000,000 P22,500,000
Estimated cost to complete 22,500,000 9,500,000
Total estimated cost P32,500,000 P32,000,000
Total estimated gross profit P 2,500,000 P 3,000,000
Percentage of completion 30.77% 70.3125%
Gross profit to date P 769,250 P 2,109,375
Less GP recognized in prior year/s - 769,250
GP to be recognized this year P 769,250 P 1,340,125

Problem 7-8
Franchise A:
The circumstances imply that the full accrual method could be used.
Franchise revenue P3,578,000*
Franchise cost 1,400,000 P2,178,000
Interest revenue (P2,178,000 x 4%) 87,200
Income from Franchise A P2,265,200

*Initial deposit P 1,400,000

PV of four payments [4% for 4 periods
(P600,000 x 3.6299)] 2,178,000
P 3,578,000

Franchise B:
Because of the doubtful collection and only partial completion, the deposit method should be used. No revenue or income would be
recognized in 2012 from the franchise fee. However, because the first payment of P600,000 was made, interest revenue of P87,200 would
be recognized.
AA1 - Chapter 7 (2012 edition) page 155

Franchise C:
Because of the doubtful collection but substantial completion, either the installment sales or cost recovery method could be used. If the
installment sales method is used, gross profit of P843,600* would be recognized in 2012 plus interest revenue of P87,200.

*Franchise revenue P3,578,000

Franchise cost 2,000,000
Franchise gross profit P1,578,000

Gross profit percentage: P1,578,000 ÷ P3,578,000 44.1%

Collections in 2012:
Initial fee P1,400,000
First payment:
Interest P 87,200
Principal 512,800 512,800
Total P 600,000 P1,912,800

Gross profit recognized in 2012: P1,912,800 x 44.1% = P843,600

If the cost recovery method is used, no revenue or income would be recognized, because the P2,000,000 collections are exactly offset by
the P2,000,000 costs.

Problem 7-9
2012
July 1 Cash 7,000,000
Notes Receivable 8,000,000
Unearned Franchise Fee 15,000,000

Aug. 15 Deferred Franchise Cost 800,000

Cash 800,000

Sept. 15 Deferred Franchise Cost 500,000

Cash 500,000

Dec. 31 Interest Receivable 400,000

Interest Revenue 400,000
AA1 - Chapter 7 (2012 edition) page 156

2013
Jan. 1 Cash 2,400,000
Notes Receivable 2,000,000
Interest Receivable 400,000

15 Deferred Franchise Cost 1,000,000

Cash 1,000,000

31 Unearned Franchise Fee 15,000,000

Cost of Franchise Revenue 2,300,000
Franchise Fee Revenue 15,000,000
Deferred Franchise Cost 2,300,000

July 1 Cash 2,300,000

Notes Receivable 2,000,000
Interest Revenue 300,000
P6,000,000 x 10% x 6/12

Dec. 31 Interest Receivable 200,000

Interest Revenue 200,000

Problem 7-10

1. Downpayment made on Jan 1, 2012 P 800,000.00

Present value of an ordinary annuity (P240,000 x 3.69590) 887,016.00
Total revenue recorded by Triple Eight P1,687.016.00

2. Cost of acquisition P 1,687,016

3. Cash 800,000.00
Notes Receivable 1,200,000.00
Discount on Notes Receivable 312,984.00
Unearned Franchise Fees 1,687,016.00
AA1 - Chapter 7 (2012 edition) page 157

4. a. P800,000 cash received from downpayment. (P887,016.00 is recorded as unearned revenue from franchise fees).
b. P800,000 cash received from downpayment
c. None. (P 800,000 is recorded as unearned revenue from Franchise fees).

MULTIPLE CHOICE

1. C 6. B
2. B 7. D
3. D 8. D
4. A 9. D
5. C 10. C

11. D P20,000,000 x (3,000,000/15,000,000) = P4,000,000

12. A Contract price P10,500,000

Less Total estimated cost:
Cost incurred to date P3,150,000
Est. cost to complete 6,300,000 9,450,000
Total estimated income P 1,050,000
% of completion (3150/9450) 33 1/3%
Income to be recognized in 2012 P 350,000

13. B Contract price P9,000,000

Total estimated cost 8,100,000
Total estimated income P 900,000
Percentage-of-completion (27/81) 33 1/3%
Income recognized last year P 300,000

14. C Contract price P15,000,000

Total estimated cost (P4,650,000 + P10,850,000) 15,500,000
Total estimated loss – to be recognized in full P 500,000
AA1 - Chapter 7 (2012 edition) page 158

15 B Contract price P14,000,000

Total estimated cost (P4M + P4M + P2M) 10,000,000
Total estimated gross profit P 4,000,000
Percentage-of-completion (8M/10M) 80%
Gross profit to date P 3,200,000
Less Gross profit recognized in 2011
(P14M –P8M = P6M x 4/8) 3,000,000
Gross profit to be recognized in 2012 P 200,000

16 B Contract price P3,000,000

Total estimated cost 1,800,000
Total estimated gross profit P1,200,000
Percentage-of-completion (600/1,800) 33 1/3%
Gross profit to be recognized in 2012 P 400,000

17. A Contract price P12,000,000

Total cost incurred 10,800,000
Gross profit P 1,200,000
Gross profit percentage (1,200/12,000) 10%

18 A Cubao Marikina
Contract price P16,200,000 P25,200,000
Total estimated cost 14,400,000 23,100,000
Total est. gross profit P 1,800,000 P 2,100,000
Percentage-of-completion 83 1/3% 100%
Gross profit to date P 1,500,000 P 2,100,000
Less GP recognized in 2011 750,000* 1,872,000**
GP to be recognized In 2012 P 750,000 P 228,000

Total GP = P750,000 + P228,000 P 978,000

*P16,200,000 – P14,400,000 = P1,800,000 x 60/144 = P750,000
**P25,200,000 – P22,500,000 = P2,700,000 x 156/225 = P1,872,000

19. D 20,000,000/24,000,000 83.33%

AA1 - Chapter 7 (2012 edition) page 159

20. A Contract price P30,000,000

Total estimated cost 24,000,000
Total estimated gross profit P 6,000,000
Percentage-of-completion 83.33%
GP to date P 5,000,000
GP recognized in prior years
(P30M - P22M = P8M x 50%) 4,000,000
GP to be recognized in 2012 P 1,000,000

21. A Total amount billed P843,750

Less Balance of accounts receivable 300,000
Total collections P543,750
Amount deposited 500,000
Cash collected not yet deposited P 43,750

22. D P150,000 ÷ 937,500/9,000,000 P1,440,000

23. D Mobilization fee (P1.2B x 1%) P 1.2M

Collections on billings (1.2B x 10% x 90%) 10.8M
Total fee received by NNO P12.0M

24. C Contract price P100.00M

Gross profit rate 25%
Total estimated gross profit P25.00M
Percentage-of-completion 50%
Realized gross profit P12.50M

25. D
26. D
27. A
28. C
29. D P200,000 + P1,000,000 – P900,000 = P300,000
AA1 - Chapter 7 (2012 edition) page 160

30. C Downpayment P 50,000

First installment payment 50,000
Add’l fee (P1,000,000 x 3%) 30,000
Earned Franchise Fees P130,000

31. C P1,000,000 x 1/5 = P200,000 + 1% of P5,000,000 P 250,000

32. D P 1,000,000 + 5% of P8,000,000 = P1,400,000

33. C Downpayment P 100,000

PV of installment payment 199,650
Additional fee ( P 9,000,000 x 5% ) 450,000
Earned franchise fee P 749,650