Trans Fat Express,Inc

Essay

Trans Fat Express,Inc.entered into an agreement with a franchisee on July 1,2014.The agreement specified that Trans Fat Express receive an initial franchise fee of $200,000 (30% due at signing;the balance to be paid in equal annual installments plus interest at 8% of the unpaid balance beginning July 1,2015).The franchise fee is comprised of (1)consideration for the right to operate the franchise,and (2)payment for services to be performed by Trans Fat Express that include site selection and building design,employee training,and management training.Substantial performance of these services is deemed to have occurred when the franchise opens for business in April 2015.Trans Fat Express allocates 60% of the fee to the right to operate the franchise and the remainder to the subsequently performed services.
Required:
a.Prepare the entry to record the signing of the franchise agreement and receipt of the payment due at that time.
b.Prepare any adjusting journal entries necessitated at December 31,2014 by this agreement.
c.Prepare the entry Trans Fat Express should make when the franchisee opens the location in April 2015.