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Chapter 12: Question 4BE. (page 638)

Gershwin Corporation obtained a franchise from Sonic Hedgehog Inc. for a cash payment of $120,000 on April 1, 2017. The franchise grants Gershwin the right to sell certain products and services for a period of 8 years. Prepare Gershwin’s April 1 journal entry and December 31 adjusting entry.

Short Answer

Expert verified

Answer

Franchise debited by $120,000 and cash account credited by $120,000.

Amortization expense account debited by $11,250 and franchise account credited by $11,250.

Step by step solution

01

Meaning of Journal Entry

A journal entry is a type of accounting entry that is used to record business transaction in a company's accounting records.

02

Journal Entry

Date

Particulars

JF

Debit

Credit

Franchise

$120,000

Cash

$120,000

(Being payment made by cash)

Amortization Expense

$11,250

Franchise

$11,250

(Being amortization expense debited)

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