GoRight Inc. (GRI) is a franchisor who sells the rights to its trademark to franchisees. The franchisee pays an upfront, nonrefundable deposit of $ 1,000. GRI will then check the background and credentials of the franchisee prior to signing a licensing agreement. This takes only about four days to complete. If the franchisee passes this screening, then a contract is signed with GRI. The contract states that for consideration of $ 150,000, the franchisee will have the right to use the trademark for a period of three years. The three year period commences at the beginning of the month the contract is signed. At the end of the three- year period, the contract can be extended for another two years on pay-ment of an agreed upon amount at that time. The franchisee may pay the $ 150,000 in three installments starting on the date that the contract is signed. (The upfront fee is part of the $ 150,000 total.) In other words, on signing of the contract, $ 50,000 is due, and then another $ 50,000 is paid in the next 30 days and the final $ 50,000 payment is due in 60 days (from the date of signing the contract). Failure to pay the amounts on time will forfeit the franchisee’s right to use the trademark and a refund of only 95% will be repaid. The 5% is kept to cover administrative costs incurred. In 20X4, GRI signed 20 contracts with various franchisees as detailed below. GRI has a December year- end.

1. Give the required entries for 20X4 summarized for the year.
2. Give the related balances that would be reported on the 20X4 SCIs andSFP.

  • CreatedFebruary 17, 2015
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