Chapter 18, Problem 39Q

To determine

Franchise: It is the right to sell a company’s product with specified terms and condition in a particular area.

Franchisee: It is an organization or a sole proprietor that holds a franchise for the sale of goods and services in operations.

Franchisor: It is an organization or a sole proprietor that provides a franchise for the sale of goods and services in operations.

Franchise fees: It is an amount which is paid by the franchisee to the franchisor for the life of franchise agreement.

To determine the way franchisor accounts for continuing franchise fees and routine sales of equipment and supplies to franchisees.