Exercise $6-17($Algo$)$ Franchises; residual method $[$L$06-6,6-7]$

Monitor Muffler sells franchise arrangements throughout the United States and Canada. Under a franchise agreement, Monitor receives $$800,000$ in exchange for satisfying the following separate performance obligations: $(1)$ franchisees have a five$-$year right to operate as a Monitor Muffler retail establishment in an exclusive sales territory, $(2)$ franchisees receive initial training and certification as a Monitor Mechanic, and $(3)$ franchisees receive a Monitor Muffler building and necessary equipment. The stand$-$alone selling price of the initial training and certification is $$19,000,$ and $$610,000$ for the building and equipment. Monitor estimates the stand$-$alone selling price of the five$-$year right to operate as a Monitor Muffler establishment using the residual approach.

Monitor received $$95,000$ on July $1,2024,$ from Perkins and accepted a note receivable for the rest of the franchise price. Monitor will construct and equip Perkins's building and train and certify Perkins by September $1,$ and Perkins's five$-$year right to operate as a Monitor Muffler establishment will commence on September $1$ as well.

Required:

What amount would Monitor calculate as the stand$-$alone selling price of the five$-$year right to operate as a Monitor Muffler retail establishment?

What journal entry would Monitor record on July $1,2024,$ to reflect the sale of a franchise to Dan Perkins?

How much revenue would Monitor recognize in the year ended December $31,2024,$ with respect to its franchise arrangement with Perkins? $($Ignore any interest on the note receivable.$)$

Complete this question by entering your answers in the tabs below.

Required $3$

What journal entry would Monitor record on July $1,2024,$ to reflect the sale of a franchise to Dan Perkins?

Note: If no entry is required for a transaction$/$event$,$ select $"$No journal entry required" in the first account field.

Journal entry worksheet

$1$

Record the sale of a franchise to Dan Perkins on July $1,2024.$