Sunland Inn charges an initial fee of $ 2,448,000 for a franchise, with $ 489,600 paid when the agreement is signed and the balance in four annual payments. The present value of the annual payments, discounted at 10%, is $ 1,551,000. The franchisee has the right to purchase $ 91,800 of kitchen equipment and supplies for $ 76,500. An additional part of the initial fee is for advertising to be provided by Sunland Inn during the next five years. The value of the advertising is $ 1,020 a month. Collectibility of the payments is reasonably assured and Sunland Inn has performed all the initial services required by the contract. Prepare the entry to record the initial franchise fee
Sunland Inn charges an initial fee of $ 2,448,000 for a franchise, with $ 489,600 paid when the agreement is signed and the balance in four annual payments. The present value of the annual payments, discounted at 10%, is $ 1,551,000. The franchisee has the right to purchase $ 91,800 of kitchen equipment and supplies for $ 76,500. An additional part of the initial fee is for advertising to be provided by Sunland Inn during the next five years. The value of the advertising is $ 1,020 a month. Collectibility of the payments is reasonably assured and Sunland Inn has performed all the initial services required by the contract.
Prepare the entry to record the initial franchise fee
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