Monitor Muffler sells franchise arrangements throughout the United States and Canada. Under a franchise agreement. Monitor receives $600000 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 $15000, and $450000 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 $75000 on July 1, 2016, from Perkins and accepted a note receivable for the rest of the franchise price. Monitor will construct and equip Perkins' building and train and certify Perkins by September 1, and Perkins' 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?
Stand-alone selling price =
What journal entry would Monitor record on July 1, 2016, to reflect the sale of a franchise to Dan Perkins? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Date General Journal Debit Credit