Question

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

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

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.

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)