Occasionally a franchise agreement grants the franchisee the right to make future bargain purchases of equipment or supplies. When recording the initial franchise fee, the franchisor should

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When the franchise agreement grants the franchisee the right to make future bargain purchases of equipment or supplies, the initial franchise fee should be recorded as unearned revenue. A portion of the initial franchise fee should then be recognized as revenue when the franchisee makes the bargain purchases in the future. This is because the franchisor has not fully completed their obligation under the franchise agreement until the franchisee makes the bargain purchases. Therefore, option B is the correct choice.

Occasionally a Franchise Agreement Grants the Franchisee the Right to Make