A Neverland company pays a Wonderland ¥3 million for the local franchise rights. This will result in a ______ to Wonderland’s ______.

Question

BlackTom AI · Accepted Answer

Granting a franchise creates an inflow of cash and increases the owner’s equity, so Wonderland records an increase in assets and a corresponding credit to capital.

1) Relevant knowledge points and concepts
- Double-entry bookkeeping: every transaction affects at least two accounts: one debited, one credited.
- Debit and credit rules: debits increase assets and expenses; credits increase liabilities, revenue, and owner’s equity (capital).
- Receipt of a franchise fee: cash (a current asset) increases, and the inflow represents income that ultimately increases owner’s equity (capital). Companies may record it as revenue which flows into retained earnings (part of capital).

2) Step-by-step reasoning
- Neverland pays Wonderland ¥3,000,000 for franchise rights. Wonderland receives cash.
- Increase in cash (an asset) is recorded with a debit.
- The corresponding credit records the source of that increase: an increase in equity (capital) via revenue/owner’s investment.

3) Journal entry (all intermediate steps shown)
- Debit Cash (current asset) ¥3,000,000 — this increases Wonderland’s assets.
- Credit Capital (owner’s equity) ¥3,000,000 — this records the increase in equity resulting from the franchise fee (alternatively, the company could credit Revenue and later close to Retained Earnings, but the net effect is an increase in capital).

4) Why the correct answer is correct
- The franchise fee causes a credit to Wonderland’s capital because credits increase equity. The ¥3 million received increases Wonderland’s net worth; therefore equity (capital) is credited.

5) Why other options are incorrect
- "credit; current": A credit to a current account would decrease that current asset; receiving cash increases (not credits) a current asset.
- "debit; capital": Debiting capital would decrease owner’s equity, which contradicts the receipt of income that increases equity.
- "debit; current": While cash (a current asset) is debited, this choice implies the effect is a debit to a current account as the only impact; it ignores the necessary corresponding credit to capital (equity).

6) Conclusion
The correct entry effect is a credit to Wonderland’s capital, matching the provided answer: credit; capital.

A Neverland company pays a Wonderland ¥3 million for the local franchise rights. This will result in a to Wonderland’s .单项选择题

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A Neverland company pays a Wonderland ¥3 million for the local franchise rights. This will result in a ______ to Wonderland’s ______.单项选择题

类似问题

The ¥2,000 train ride in Wonderland taken by a lady from Neverland, which was paid for via a credit card, would result in a ______ to Neverland’s ______ to reflect the trade of a service.

An unqualified accountant entered a $36 debit entry as credit entry. This:[Fill in the blank]

An unqualified accountant entered a $36 debit entry as credit entry. This:[Fill in the blank]

The Surfboard Centre paid $5,000 cash for inventory. These boards are on display in their showroom. This transaction will:

When a company receives cash before products or services are provided the following results:

Which of the following best describes the double-entry rule?

Which of the following best describes the double-entry rule?

更多留学生实用工具

希望你的学习变得更简单

A Neverland company pays a Wonderland ¥3 million for the local franchise rights. This will result in a to Wonderland’s .单项选择题

The ¥2,000 train ride in Wonderland taken by a lady from Neverland, which was paid for via a credit card, would result in a to Neverland’s to reflect the trade of a service.