Exhibit 18-5 Morris Co B) C) $\begin{array} { l l } \text { Cash } & 800 \\\text { Unearned Franchise Fees } & 800\end{array}$

question 4

Multiple Choice

Exhibit 18-5 Morris Co.sold a franchise at an initial franchise fee of $5, 000.A down payment of $800 was received with the balance covered by the issuance of a $4, 200, 6% note, payable by the franchisee in four equal annual installments.The refund period has expired and the collectibility of the note is reasonably assured.
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Refer to Exhibit 18-5.If all material services have not been substantially performed, which entry to record the franchise is correct?

• A)
• \(\begin{array} { l c r }
• \text { Cash } & 800 & \\
• \text { Notes Receivable } & 4,200 & \\
• \quad \text { Unearned Franchise Fees } & 5,000
• \end{array}\)
• B)
• \(\begin{array} { l c c }
• \text { Cash } & 800 & \\
• \text { Notes Receivable } & 4,200 & \\
• \text { Unearned Franchise Fees } & 4,200 \\
• \text { Franchise Revenue } & 800
• \end{array}\)
• C)
• \(\begin{array} { l l }
• \text { Cash } & 800 \\
• \text { Unearned Franchise Fees } & 800
• \end{array}\)
• D)
• \(\begin{array} { l r l }
• \text { Cash } & 800 & \\
• \text { Notes Receivable } & 4,200 & \\
• \text { Franchise Revenue } & & 5,000
• \end{array}\)

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Definitions:

Price Ceiling

A legal maximum price set by the government for goods and services, intended to prevent prices from rising above a certain level.

Equilibrium Price

The price at which the quantity of a product offered is equal to the quantity of the product in demand, leading to market stability where there is no shortage or surplus.

Temporary Surplus

A situation where the supply of a product exceeds its demand for a short period, often leading to price reductions.

Quantity Supplied

The amount of a good or service that producers are willing and able to sell at a particular price.