Question

On January 1, 2017, Lesley Benjamin signed an agreement, covering 5 years, to operate as a franchisee of Coronado Inc. for an initial franchise fee of $64,000. The amount of $13,000 was paid when the agreement was signed, and the balance is payable in five annual payments of $10,200 each, beginning January 1, 2018. The agreement provides that the down payment is nonrefundable and that no future services are required of the franchisor once the franchise commences operations on April 1, 2017. Lesley Benjamin’s credit rating indicates that she can borrow money at 8% for a loan of this type.

Prepare journal entries for Coronado for 2017-related revenue for this franchise arrangement, assuming that in addition to the franchise rights, Coronado also provides 1 year of operational consulting and training services, beginning on the signing date. These services have a value of $4,300. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.) Date Account Titles and Explanation Debit Credit Jan. 1, 2017 Apr. 1, 2017 Dec. 31, 2017 (To record service revenue) (To record interest revenue) SHOW LIST OF ACCOUNTS SHOW SOLUTION LINK TO TEXT

Your answer is incorrect. Try again. Repeat the requirements for part (a), assuming that Coronado must provide services to Benjamin throughout the franchise period to maintain the franchise value. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.) Date Account Titles and Explanation Debit Credit Jan. 1, 2017 Dec. 31, 2017 (To record service revenue) (To record interest revenue)

Answer 1

Gillen that The Intial Franchise Fees is $66,000 The Less down Payment is $13,000 The Installment in five annual payment is $10,200 (•*$51,000+5 o low the balance is $64,000 $13,000 . . . =451,000 : Now Porescent value of Annuity is :- Let us take the 'I' value is at - in value is 5 $10,200 x PvIFA (04.5) $10,200% 3.9927 $40,726 " To find the Interest Revenue - Present value - 1. Present value - of Annuity - $ 51,000 - $40 726 $ 10,2744

To find the jowned Entries 10/2017 - Date :: Account 'fit les anel Explanation Dobit credit $13,000 $51,000 Notes Receivable Discount on elstur Receivable $10,274 : $ 53,726 ineanned Revenue from franelise tee 4/1/2017 $ 53,726 $53, 226 cinearned Franchise fees Franchise fees 31/12/2017 Discount on nots Receivable (540,726x87.) 43,258 Interest Revenue $3,258

11/2017 Accounts fittes and Englantion Debit condit Cash $ 3,00 D Notes Receivable 151,000 $10,274 Discount on note Revenue from franchise Linearned franchise Revenue $13,000 $ 40, 726