Pacific Cross Burgers inc charges an initial franchise fee of $70,000. Upon the signing agreement (which covers 3 years), a payment of $28,000 is due. Thereafter, three annual payments of $14,000 are required. The credit rating of the franchisee is such that it would have to pay interest at 10% to borrow money. The franchise agreement is signed on May 1, 2017, and the franchise commences operation on July 1, 2017.

Instructions

a.Prepare the journal entries in 2017 for the under the following with no future services are required by the franchiser once the franchise starts operations.

b.Prepare the journal entries in 2017 for the under the following with the franchiser has substantial services to perform, once the franchise begins operations, to maintain the value of the franchise.

c. Prepare the journal entries in 2017 for the under the following with the total franchise fee includes training services (with the value of $2,400) for the period leading up to the franchise opening and for 2 months following opening.