Franchise Accounting

Question 1

initial franchise fees

Answer 1

pv of amount paid or to be paid by franchisee is recorded as an intangible and amortized over the expected life of the franchise

Question 2

continuing franchise fees

Answer 2

expensed in the period occured

Question 3

Problem

Answer 3

JE:

Franchises
Discount on notes payable
notes payable
cash

Franchised (downpayment +pv of future payments of fees)

Discount on notes payable: contra liability
will be recognized as interest expense over the expected useful life