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B is corrent. The requirement is to determine the amount that Moon should report as unearned franchise fees. Franchise fee revenue is recognized when all material services have been substantially performed by the franchiser. Substantial performance means that the franchiser has performed substantially all of the required initial services and has no remaining obligation to refund any cash received. As of December 31, year 1, the date the agreement was signed, no services have been performed. Therefore, this answer is correct because the entire $88,000 must be recognized as unearned franchise fees in the December 31, year 1 balance sheet.
A is incorrect. Franchise fee revenue is recognized when all material services have been substantially performed by the franchiser. Substantial performance means that the franchiser has performed substantially all of the required initial services and has no remaining obligation to refund any cash received. As of December 31, year 1, the date the agreement was signed, no services have been performed. Therefore, this answer is incorrect because the entire $88,000 must be recognized as unearned franchise fees in the December 31, year 1 balance sheet.  
A is incorrect. Franchise fee revenue is recognized when all material services have been substantially performed by the franchiser. Substantial performance means that the franchiser has performed substantially all of the required initial services and has no remaining obligation to refund any cash received. As of December 31, year 1, the date the agreement was signed, no services have been performed. Therefore, this answer is incorrect because the entire $88,000 must be recognized as unearned franchise fees in the December 31, year 1 balance sheet.  
D is incorrect.  Franchise fee revenue is recognized when all material services have been substantially performed by the franchiser. Substantial performance means that the franchiser has performed substantially all of the required initial services and has no remaining obligation to refund any cash received. As of December 31, year 1, the date the agreement was signed, no services have been performed. Therefore, this answer is incorrect because the entire $88,000 must be recognized as unearned franchise fees in the December 31, year 1 balance sheet.