(Franchise Entries) Pacific Crossburgers Inc. charges an initial franchise fee of $70,000. Upon the signing of the agreement (which covers 3 years), a payment of $28,000 is due. Thereafter, three annual payments of $14,000 are required. The credit rating of the franchisee is such that it would have to pay interest at 10% to borrow money. The franchise agreement issigned on May 1, 2017, and the franchise commences operation on July 1, 2017.InstructionsPrepare the journal entries in 2017 for the franchisor under the following assumptions. (Round to the nearest dollar.)(a) No future services are required by the franchisor once the franchise starts operations.(b) The franchisor has substantial services to perform, once the franchise begins operations, to maintain the value of the franchise.(c) The total franchise fee includes training services (with a value of $2,400) for the period leading up to the franchise opening and for 2 months following opening.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

(Franchise Entries) Pacific Crossburgers Inc. charges an initial franchise fee of $70,000. Upon the signing of the agreement (which covers 3 years), a payment of $28,000 is due. Thereafter, three annual payments of $14,000 are required. The credit rating of the franchisee is such that it would have to pay interest at 10% to borrow money. The franchise agreement is
signed on May 1, 2017, and the franchise commences operation on July 1, 2017.
Instructions
Prepare the journal entries in 2017 for the franchisor under the following assumptions. (Round to the nearest dollar.)
(a) No future services are required by the franchisor once the franchise starts operations.
(b) The franchisor has substantial services to perform, once the franchise begins operations, to maintain the value of the franchise.
(c) The total franchise fee includes training services (with a value of $2,400) for the period leading up to the franchise opening and for 2 months following opening.

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps with 3 images

Blurred answer
Knowledge Booster
Revenue Recognition
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education