Flapper Jack\'s Pancake Restaurants Inc. sells franchises for an initial fee of
ID: 2491868 • Letter: F
Question
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 and troubleshooting, as needed, over the first five years 1. 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. 2. 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 March 15, 2015:Explanation / Answer
1. On 15, March,2015 JE will be as follows:
Cash A/c -Dr. $ 6,000
Note Receivable A/c -Dr. $ 30,000
To Unearned Franchise Fee Revenue $ 36,000
(Narration: Being cash Received $6,000 on this date and rest $30000 amount being debited to Note receivable to be recognized in each year as and when received. And $ 36000 credited to Unearned Franchise Fee revenue, as 15 March,2015 being the signing Date and performance yet pending.)
2. On 15, March, 2015 JE will remain same as stated above.
On 20 October, 2015 JE will be as follows:
Unearned Franchise Fee Revenue A/c - Dr. $ 36,000
To Franchise Fee Revenue A/c $ 36,000
(Narration : Being All continuing obligations met on such date. Thus, Franchise Fee Revenue recognized.)
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