A Franchise Agreement Grants the Franchisor an Option to Purchase

A franchise agreement grants the franchisor an option to purchase the franchisee's business. It is probable that the option will be exercised. When recording the initial franchise fee, the franchisor should

A) record the entire initial franchise fee as a deferred credit which will reduce the franchisor's investment in the purchased outlet when the option is exercised.
B) record the entire initial franchise fee as unearned revenue which will reduce the amount of cash paid when the option is exercised.
C) record the portion of the initial franchise fee which is attributable to the bargain purchase option as a reduction of the future amounts receivable from the franchisee.
D) None of these.