The Chocomalt Company sells franchises. For each franchise, the company charges an initial franchise fee of $28,000. The franchise agreement requires a down payment of $8,000, with the balance covered by the issuance of a $20,000, 12% note, payable by the franchisee in two equal annual installments.
Required
Prepare the journal entry required by the Chocomalt Company to record each initial franchise fee under each of the following independent situations:
1. All material services have been substantially performed, the refund period has expired, and the collectibility of the note is reasonably assured.
2. All material services have been substantially performed, the refund period has expired, and the collectibility of the note is not reasonably assured.
3. All material services have been substantially performed, the refund period has not expired, and the collectibility of the note is reasonably assured.
4. All material services have not been substantially performed, the refund period has expired, and there is no basis for estimating the collectibility of the note.
5. The refund period has expired and the collectibility of the note is reasonably assured, but all material services have not been substantially performed.