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Find what entry should dairy treats make on january

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Reference no: EM132760977

Problem 1: On January 1, 2021 Dairy Treats, Inc. entered into a franchise agreement with a company allowing the company to do business under Dairy Treats' name. Dairy Treats had performed substantially all required services by January 1, 2021, and the franchisee paid the initial franchise fee of $980,000 in full on that date. The franchise agreement specifies that the franchisee must pay a continuing franchise fee of $84,000 annually, of which 20% must be spent on advertising by Dairy Treats. What entry should Dairy Treats make on January 1, 2021 to record receipt of the initial franchise fee and the continuing franchise fee for 2021?

a. Cash....................................................................................... 1,064,000

Franchise Fee Revenue............................................ 980,000

Franchise Revenue................................................... 84,000

b. Cash....................................................................................... 1,064,000

Unearned Franchise Revenue.................................. 1,064,000

c. Cash....................................................................................... 1,064,000

Franchise Fee Revenue............................................ 980,000

Franchise Revenue................................................... 67,200

Unearned Franchise Revenue.................................. 16,800

d. Prepaid Advertising................................................................ 16,800

Cash....................................................................................... 1,064,000

Franchise Fee Revenue............................................ 980,000

Franchise Revenue................................................... 84,000

Unearned Franchise Revenue.................................. 16,800

Reference no: EM132760977

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