Don Jackson paid Hungry Hannah’sHamburgers $54,000 for the right to operate a fast-food restaurantin...Don...

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Accounting

Don Jackson paid Hungry Hannah’sHamburgers $54,000 for the right to operate a fast-food restaurantin Thomasville under the Hungry Hannah’s name. Jackson also agreedto pay an operating fee of 0.5% of sales for advertising and otherservices rendered by Hungry Hannah’s. Jackson began operations onJanuary 2, 2011. Sales for 2011 amounted to $540,000. The finiteuseful life of the franchise is 40 years.
Give the entries to record the paymentof the $54,000 and to record expenses incurred relating to theright to use the Hungry Hannah’s name.

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Entries are provided along with description of transaction and simple explanation.

Transaction	Accounts title	Debit	Credit
1. When Franchise rights are purchased	Franchise Assets	$ 54,000.00
	Cash		$ 54,000.00
	(Cash paid for the use of rights)

2. Entry to record Sales revenue	Cash	$ 540,000.00
	Sales Revenue		$ 540,000.00
	(Sales revenue earned)

3. When payment is made to Franchisor	Franchise Operating Fees	$ 2,700.00
	Cash		$ 2,700.00
	(payment as part of revenue made: 540000 x 0.5%)

4. Amortisation of Franchise	Amortisation expense - Franchise	$ 1,350.00
	Accumulated Amortisation - Franchise		$ 1,350.00
	(Expense amortised: 540000 / 40 years)

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In: AccountingDon Jackson paid Hungry Hannah’sHamburgers $54,000 for the right to operate a fast-food restaurantin...Don Jackson paid Hungry Hannah’sHamburgers $54,000 for the right to operate a fast-food restaurantin Thomasville under the Hungry Hannah’s name. Jackson also agreedto pay an operating fee of 0.5% of sales for advertising and otherservices rendered by Hungry Hannah’s. Jackson began operations onJanuary 2, 2011. Sales for 2011 amounted to $540,000. The finiteuseful life of the franchise is 40 years.Give the entries to record the paymentof the $54,000 and to record expenses incurred relating to theright to use the Hungry Hannah’s name.