McNicols Started Selling Franchise Locations in April 2021 Required:
A)Explain How McNicols Should Account for the Initial Fee

McNicols started selling franchise locations in April 2021. The franchisee pays continuing fees based on annual sales. The initial fee relates to finding a store location and training the franchisee at McNicols' training facility over a 2-year period.
$$\begin{array} { | l | r | r | } \hline & \text { Fiscal 2021 } & { \text { Fiscal 2022 } } \\\hline \text { Initial franchise fee } & 85,000 & 95,000 \\\hline \text { Contionuing franchise fees } & 4 \% & 3 \% \\\hline \text { Franchise sold } & 5 & 3 \\\hline \text { Franchisees' reported sales } & 1,500,000 & 2,000,000 \\\hline\end{array}$$ Required:
a)Explain how McNicols should account for the initial fee. Ignore the time value of money.
b)Assume that management estimates that 40% of the value of services related to the initial fee is fulfilled in the first year of signing the franchise agreement. Provide the journal entries to record this revenue in fiscal 2021 and in 2022.
c)Explain how McNicols should account for the ongoing fees.
d)Provide the journal entries to record the ongoing fees in fiscal 2021 and 2022.