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Exercise 18-38 Wildhorse Inc. charges an initial franchise fee of $69,000. Upon the signing of the agreement (which covers 3 years), a payment of $27,600 is due. Thereafter, 3 annual payments of $13,800 are required. The credit rating of the franchisee is such that it would have to pay interest at 10% to borrow money. The franchise agreement is signed on May 1, 2020, and the franchise commences operation on July 1, 2020. Click here to view factor table. Prepare the journal entries in 2020 for the franchisor under the following assumptions. (a) No future services are required by the franchisor once the franchise starts operations. (b) The franchisor has substantial services to perform, once the franchise begins operations, to maintain the value of the franchise. (c) The total franchise fee includes training services (with a value of $1,700) for the period leading up to the franchise opening and for 2 months following opening. (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.) No. Date Account Titles and Explanation Debit Credit (a) May 1, 2020 enter an account title for the journal entry on May 1, 2017 assuming option a enter a debit amount enter a credit amount enter an account title for the journal entry on May 1, 2017 assuming option a enter a debit amount enter a credit amount enter an account title for the journal entry on May 1, 2017 assuming option a enter a debit amount enter a credit amount enter an account title for the journal entry on May 1, 2017 assuming option a enter a debit amount enter a credit amount choose a transaction date enter an account title for the journal entry assuming option a enter a debit amount enter a credit amount enter an account title for the journal entry assuming option a enter a debit amount enter a credit amount (b) May 1, 2020 enter an account title for the journal entry on May 1, 2017 assuming option b enter a debit amount enter a credit amount enter an account title for the journal entry on May 1, 2017 assuming option b enter a debit amount enter a credit amount enter an account title for the journal entry on May 1, 2017 assuming option b enter a debit amount enter a credit amount enter an account title for the journal entry on May 1, 2017 assuming option b enter a debit amount enter a credit amount choose a transaction date enter an account title for the journal entry assuming option b enter a debit amount enter a credit amount enter an account title for the journal entry assuming option b enter a debit amount enter a credit amount (c) May 1, 2020 enter an account title for the journal entry on May 1, 2017 assuming option c enter a debit amount enter a credit amount enter an account title for the journal entry on May 1, 2017 assuming option c enter a debit amount enter a credit amount enter an account title for the journal entry on May 1, 2017 assuming option c enter a debit amount enter a credit amount enter an account title for the journal entry on May 1, 2017 assuming option c enter a debit amount enter a credit amount enter an account title for the journal entry on May 1, 2017 assuming option c enter a debit amount enter a credit amount Jul. 1, 2020 enter an account title for the journal entry on July 1, 2017 assuming option c enter a debit amount enter a credit amount enter an account title for the journal entry on July 1, 2017 assuming option c enter a debit amount enter a credit amount enter an account title for the journal entry on July 1, 2017 assuming option c enter a debit amount enter a credit amount enter an account title for the journal entry on July 1, 2017 assuming option c enter a debit amount enter a credit amount choose a transaction date enter an account title for the journal entry assuming option c enter a debit amount enter a credit amount enter an account title for the journal entry assuming option c enter a debit amount enter a credit amount Click if you would like to Show Work for this question: Open Show Work Show List of Accounts Question Attempts: 0 of 3 used Save for later Submit Answer

Answer 1

a.

Date	Account	Debit	Credit
May 1, 2020	Cash	$27,600
	Notes Receivable ($69,000 - $27,600)	$41,400
	Discount on Notes Receivable ($13,800 * 3) - ($13,800 * 2.48685)		$7,081
	Unearned Franchise Revenue		$61,919
July 1, 2020	Unearned Franchise Revenue	$61,919
	Franchise Revenue		$61,919

PVAF (10%, 3 years) = 2.48685

b.

Date	Account	Debit	Credit
May 1, 2020	Cash	$27,600
	Notes Receivable ($69,000 - $27,600)	$41,400
	Discount on Notes Receivable ($13,800 * 3) - ($13,800 * 2.48685)		$7,081
	Unearned Franchise Revenue		$61,919
Dec 31, 2020	Unearned Franchise Revenue	$13,760
	Franchise Revenue [($61,919 / 3) * 8 / 12]		$13,760

c.

Date	Account	Debit	Credit
May 1, 2020	Cash	$27,600
	Notes Receivable ($69,000 - $27,600)	$41,400
	Discount on Notes Receivable ($13,800 * 3) - ($13,800 * 2.48685)		$7,081
	Unearned Franchise Revenue		$60,219
	Unearned Service revenue (Training)		$1,700
July 1, 2020	Unearned Service revenue (Training)	$850
	Unearned Franchise Revenue	$60,219
	Franchise Revenue		$60,219
	Service revenue (Training)		$850
July 1, 2020	Unearned Service revenue (Training)	$850
	Service revenue (Training)		$850