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D is corrent. Initial franchise fees are recognized as revenue when all of the initial services required of the franchisor have been substantially performed.  Continuing franchise fees are reported as revenue as the fees are earned and become receivable. In this case, since all the initial services were performed by 7/1/Y1, the initial fee ($50,000) is recognized as revenue in year 1.  Also, continuing fees of $20,000 (5% x $400,000) should be recognized.  Therefore, the total franchise fee revenue to be recognized in year 1 is $70,000 ($50,000 + $20,000).
A is incorrect.   Initial franchise fees are recognized as revenue when all of the initial services required of the franchisor have been substantially performed.  Continuing franchise fees are reported as revenue as the fees are earned and become receivable. In this case, since all the initial services were performed by 7/1/Y1, the initial fee ($50,000) is recognized as revenue in year 1.  Also, continuing fees of $20,000 (5% x $400,000) should be recognized.  Therefore, the total franchise fee revenue to be recognized in year 1 is $70,000 ($50,000 + $20,000).   
B is incorrect.  Initial franchise fees are recognized as revenue when all of the initial services required of the franchisor have been substantially performed.  Continuing franchise fees are reported as revenue as the fees are earned and become receivable. In this case, since all the initial services were performed by 7/1/Y1, the initial fee ($50,000) is recognized as revenue in year 1.  Also, continuing fees of $20,000 (5% x $400,000) should be recognized.  Therefore, the total franchise fee revenue to be recognized in year 1 is $70,000 ($50,000 + $20,000).   
A is incorrect.   Initial franchise fees are recognized as revenue when all of the initial services required of the franchisor have been substantially performed.  Continuing franchise fees are reported as revenue as the fees are earned and become receivable. In this case, since all the initial services were performed by 7/1/Y1, the initial fee ($50,000) is recognized as revenue in year 1.  Also, continuing fees of $20,000 (5% x $400,000) should be recognized.  Therefore, the total franchise fee revenue to be recognized in year 1 is $70,000 ($50,000 + $20,000).