Bridgeport Inc. charges an initial franchise fee of $75,000. Upon the signing of the agreement (which...

Bridgeport Inc. charges an initial franchise fee of $75,000. Upon the signing of the agreement (which covers 3 years), a payment of $30,000 is due. Thereafter, 3 annual payments of $15,000 are required. The credit rating of the franchisee is such that it would have to pay interest at 9% to borrow money. The franchise agreement is signed on May 1, 2017, and the franchise commences operation on July 1, 2017. Prepare the journal entries in 2017 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 $2,900) for the period leading up to the franchise opening and for 2 months following opening.

Expert Solution

ekkarill92 answered 1 year ago

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