Question
You are the CPA for the franchisor. Franchisor and franchisee have entered a franchise agreement: Franchisor and franchisee enter a franchise agreement dated 010121. Franchisee
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You are the CPA for the franchisor. Franchisor and franchisee have entered a franchise agreement:
- Franchisor and franchisee enter a franchise agreement dated 010121.
- Franchisee agrees to pay Franchisor $100,000 over five years starting January 1, 2021 for Franchisors management consultation:
- $20,000 cash on January 1, 2021; and
- $80,000 note receivable in 4 annual, equal amounts of $20,000 due on Dec. 31 of each year starting December 31, 2022.
- On December 31, 2021 Franchisor has completed its management consultation duties.
What journal entry, if any, does franchisor enter in its accounting records on December 31, 2021?
a. Cash $20,000.00; debit Unearned Revenue $80,000.00; credit Deferred Revenue $100,000.00
b. debit Unearned Revenue $100,000.00; Credit Revenue $100,000.00;
c. None of the other choices are correct.
d. Debit Unearned Revenue $80,000.00; credit Deferred Revenue $80,000.00
e. Cash $20,000.00; debit Notes Receivable $80,000.00; credit Revenue $100,000.00
You are the CPA for the franchisor. Franchisor and franchisee have entered a franchise agreement:
- Franchisor and franchisee enter a franchise agreement dated 010121.
- Franchisee agrees to pay Franchisor $100,000 over five years starting January 1, 2021 for Franchisors management consultation:
- $20,000 cash on January 1, 2021; and
- $80,000 note receivable in 4 annual, equal amounts of $20,000 due on Dec. 31 of each year starting December 31, 2022.
- On December 31, 2021 Franchisor has completed its management consultation duties.
What journal entry, if any, does franchisor enter in its accounting records on December 31, 2021?
| a. | Cash $20,000.00; debit Unearned Revenue $80,000.00; credit Deferred Revenue $100,000.00 | |
| b. | debit Unearned Revenue $100,000.00; Credit Revenue $100,000.00; | |
| c. | None of the other choices are correct. | |
| d. | Debit Unearned Revenue $80,000.00; credit Deferred Revenue $80,000.00 | |
| e. | Cash $20,000.00; debit Notes Receivable $80,000.00; credit Revenue $100,000.00 |
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Essentials of Accounting for Governmental and Not-for-Profit Organizations
Authors: Paul A. Copley
10th Edition
007352705X, 978-0073527055
