Consider the following events associated with Flapper Jack\'s Pancake Restaurant

Question

Consider the following events associated with Flapper Jack's Pancake Restaurants. Flapper Jack's Pancake Restaurants Inc. sells franchises for an initial fee of $36,000 plus operating fees of $500 per month. The initial fee covers site selection, training, computer and accounting software, and on-site consulting an troubleshooting, as needed, over the first five years On March 15, 2015, Tim Cruise signed a franchise contract, paying the standard $6,000 down with the balance due over five years with interest. Assuming that the initial services to be performed by Flapper Jack's subsequent to the signing are substantial and that collection of the receivable is reasonably assured, provide the JE Flapper Jack's should record on March 15, 2015. Assume that at the time of signing the contract, collection of the receivable was assured and that service obligations were substantial. By October 20, 2015, substantially all continuing obligations had been met. Provide the JE Flapper Jack's should record on october 20, 2015.

Explanation / Answer

Journal entries

Cash

6,000

Note receivable

30,000

To unearned franchise fee revenue

36,000

2)

Unearned franchise fee revenue

36,000

To Franchise fee revenue

36,000

Cash

6,000

Note receivable

30,000

To unearned franchise fee revenue

36,000

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