Bel Air, Inc. sold a franchise that required an initial franchise fee of $20,000. A 20% down payment was required, and the balance was covered by the issuance of a 6% note, payable by the franchisee in ten equal annual installments. The collectibility of the note was reasonably assured.
Required:
Prepare the appropriate journal entry to record this franchise fee if:
a.The refund period had expired but all material services had not been substantially performed by the franchisor.
b.The refund period had expired and the franchisor had performed all material services for the franchisee.
c.The refund period had expired, the down payment represents payment for material services performed, and material services remain to be performed.

Question

Bel Air, Inc. sold a franchise that required an initial franchise fee of $20,000. A 20% down payment was required, and the balance was covered by the issuance of a 6% note, payable by the franchisee in ten equal annual installments. The collectibility of the note was reasonably assured.
Required:
Prepare the appropriate journal entry to record this franchise fee if: 
a.The refund period had expired but all material services had not been substantially performed by the franchisor.
b.The refund period had expired and the franchisor had performed all material services for the franchisee.
c.The refund period had expired, the down payment represents payment for material services performed, and material services remain to be performed.

Quizplus · Accepted Answer

The Answer of Bel Air, Inc. sold a franchise that required an initial franchise fee of $20,000. A 20% down payment was required, and the balance was covered by the issuance of a 6% note, payable by the franchisee in ten equal annual installments. The collectibility of the note was reasonably assured.
Required:
Prepare the appropriate journal entry to record this franchise fee if: 
a.The refund period had expired but all material services had not been substantially performed by the franchisor.
b.The refund period had expired and the franchisor had performed all material services for the franchisee.
c.The refund period had expired, the down payment represents payment for material services performed, and material services remain to be performed.