MBA640 Touro University Net Unearned Franchise Fee Paper

Each of ABC Pie Co.’s 21 new franchisees contracted to pay an initial franchise fee of $30,000. By December 31, 2011, each franchisee had paid a nonrefundable $10,000 fee and signed a note to pay $10,000 principal plus the market rate of interest on December 31, 2012, and December 31, 2013. Experience indicates that one franchisee will default on the additional payments. Services for the initial fee will be performed in 2012.

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