Healthy&Tasty Food Company entered into an agreement with a franchisee on July 1, 2008. The agreement...

 

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Healthy&Tasty Food Company entered into an agreement with a franchisee on July 1, 2008. The agreement specified that Healthy&Tasty receive an initial franchise fee of S150,000 (20% due at signing; the balance to be paid in equal annual installments plus interest at 9% of the unpaid balance beginning July 1, 2009). The franchise fee comprises (1) consideration for the right to operate the franchise and (2) payment for services to be performed by Healthy&Tasty 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 March 2009. Healthy&Tasty allocates the fee equally between the two elements. Required: 1. Prepare the entry to record the signing of the franchise agreement and receipt of the payment due at that time. 2. Prepare any adjusting journal entries necessitated by this agreement at December 31, 2008. 3. Prepare the entry Healthy&Tasty should make when the franchise opens in March 2009. Healthy&Tasty Food Company entered into an agreement with a franchisee on July 1, 2008. The agreement specified that Healthy&Tasty receive an initial franchise fee of S150,000 (20% due at signing; the balance to be paid in equal annual installments plus interest at 9% of the unpaid balance beginning July 1, 2009). The franchise fee comprises (1) consideration for the right to operate the franchise and (2) payment for services to be performed by Healthy&Tasty 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 March 2009. Healthy&Tasty allocates the fee equally between the two elements. Required: 1. Prepare the entry to record the signing of the franchise agreement and receipt of the payment due at that time. 2. Prepare any adjusting journal entries necessitated by this agreement at December 31, 2008. 3. Prepare the entry Healthy&Tasty should make when the franchise opens in March 2009.