On January 1, 2017, Lesley Benjamin signed an agreement, covering 5 years, to operate as a franchisee of Flounder Inc. for an initial franchise fee of $50,000. The amount of $9,000 was paid when the agreement was signed, and the balance is payable in five annual payments of $8,200 each, beginning January 1, 2018. The agreement provides that the down payment is nonrefundable and that no future services are required of the franchisor once the franchise commences operations on April 1, 2017, Lesley Benjamin's credit rating indicates that she can borrow money at 8% for a loan of this type. Your answer is correct. Prepare journal entries for Flounder for 2017-related revenue for this franchise arrangement. (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 0 for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.) Date Account Titles and Explanation Debit Credit Jan. 1, 2017 Cash 9000 Notes Receivable 41000 Discount on Notes Receivable 8260 Unearned Franchise Revenue 4174 Apr. 1, 2017 Unearned Franchise Revenue 4174 Franchise Revenue 417 Dec. 31, 2017Discount on Notes Receivable Interest Revenue 2619 Prepare journal entries for Flounder for 2017-related revenue for this franchise arrangement, assuming that in addition to the franchise rights, Flounder also provides 1 year of operational consulting and training services, beginning on the signing date. These services have a value of $3,500. (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.) Date Account Titles and Explanation Cash Notes Receivable Debit Credit Jan. 1, 2017 41000 Discount on Notes Receivable 8260 Unearned Franchise Revenue 3500 Unearned Service Revenue Apr. 1, 2017 Unearned Franchise Revenue 38240 Unearned Service Revenue 8260 38240 Franchise Revenue 3500 Service Revenue Dec. 31, 2017 Unearned Service Revenue 3500 Service Revenue 3500 (To record service revenue) Discount on Notes Receivable 2619 Interest Revenue 2619 (To record interest revenue) Repeat the requirements for part (a), assuming that Flounder must provide services to Benjamin throughout the franchise period to maintain the franchise value. (Credit account tities 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. Date Account Titles and Explanation Debit Credit Jan. 1, 2017 Dec. 31, 2017 (To record service revenue) To record interest revenue)
