Carla Inc. charges an initial franchise fee of $71,000. Upon the signing of the agreement (which covers 3 years), a payment of $28,400 is due. Thereafter, 3 annual payments of $14,200 are required. The credit rating of the franchisee is such that it would have to pay interest at 8% to borrow money. The franchise agreement is signed on May 1, 2017, and the franchise commences operation on July 1, 2017. Prepare the journal entries in 2017 for the franchisor under the following assumptions. (a) No future services are required by the franchisor once the franchise starts operations (b) The franchisor has substantial services to perform, once the franchise begins operations, to maintain the value of the franchise (c) The total franchise fee includes training services (with a value of $2,800) for the period leading up to the franchise opening and for 2 months following opening (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter O for the amounts. Round present value factor calculations to 5 decimal places, e. g.1.25124 and the final answer to o decimal places e. g. 58,971.)
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Carla Inc. charges an initial franchise fee of $71,000. Upon the signing of the agreement (which cov...
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