On October 1, 2018, the Submarine Sandwich Company entered into a franchise agreement with an individual.In exchange for an initial franchise fee of $300,000, Submarine will provide initial services to the franchisee toinclude assistance in design and construction of the building, help in training employees, and help in obtainingfinancing. Ten percent of the initial franchise fee is payable on October 1, 2018, with the remaining $270,000payable in nine equal annual installments beginning on October 1, 2019. These installments will include interestat an appropriate rate. The franchise opened for business on January 15, 2019.Required:Assume that the initial services to be performed by Submarine Sandwich subsequent to October 1, 2018, are substantial and that collectibility of the installment receivable is reasonably certain. Substantial performance of theinitial services is deemed to have occurred when the franchise opened. Prepare the necessary journal entries forthe following dates (ignoring interest charges):1. October 1, 20182. January 15, 2019
On October 1, 2018, the Submarine Sandwich Company entered into a franchise agreement with an individual.
In exchange for an initial franchise fee of $300,000, Submarine will provide initial services to the franchisee to
include assistance in design and construction of the building, help in training employees, and help in obtaining
financing. Ten percent of the initial franchise fee is payable on October 1, 2018, with the remaining $270,000
payable in nine equal annual installments beginning on October 1, 2019. These installments will include interest
at an appropriate rate. The franchise opened for business on January 15, 2019.
Required:
Assume that the initial services to be performed by Submarine Sandwich subsequent to October 1, 2018, are substantial and that collectibility of the installment receivable is reasonably certain. Substantial performance of the
initial services is deemed to have occurred when the franchise opened. Prepare the necessary
the following dates (ignoring interest charges):
1. October 1, 2018
2. January 15, 2019
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