Question

Gershwin Corporation obtained a franchise from Sonic Hedgehog Inc. for a cash payment of $180,000 on April 1, 2014. The franchise grants Gershwin the right to sell certain products and services for a period of 10 years Prepare Gershwin'sApril 1 journal entry and December 31 adjusting entry

Answer 1

Answer:

Explanation:

The journal entry is shown below:

On April 1

Franchise  A/c Dr $180,000

      To Cash A/c $18,0000

(Being the purchase of a franchise is recorded)

On December 31

Franchise Amortization Fee A/c Dr $13,500

      To Franchise A/c $13,500

(Being the franchise amortization fee is recorded)

The computation is shown below:

= $180,000 ÷ 10 years × 9 months ÷ 12 months

= $13,500