donut shop from Dollar Donuts, Inc., for $100,000. She incurred an additional $4,000 in legal costs to negotiate the terms with the franchiser. In five years, the franchise contract will be renegotiated. The current contract also states that there will be a $3, 000 annual fee plus a two percent charge based on the store's annual revenue, which is expected to average 90,000 per year. What is the franchise cost that should be capitalized? a. $88,000 b. $92, 000 c. $100,000 d. $104,000
donut shop from Dollar Donuts, Inc., for $100,000. She incurred an additional $4,000 in legal costs to negotiate the terms with the franchiser. In five years, the franchise contract will be renegotiated. The current contract also states that there will be a $3, 000 annual fee plus a two percent charge based on the store's annual revenue, which is expected to average 90,000 per year. What is the franchise cost that should be capitalized? a. $88,000 b. $92, 000 c. $100,000 d. $104,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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1. Debbie acquired a franchise to operate a donut shop from Dollar Donuts, Inc., for $100,000. She incurred an
additional $4,000 in legal costs to negotiate the terms with the franchiser. In five years, the franchise contract will be
renegotiated. The current contract also states that there will be a $3, 000 annual fee plus a two percent charge based
on the store's annual revenue, which is expected to average 90,000 per year. What is the franchise cost that should be
capitalized? a. $88,000 b. $92, 000 c. $100,000 d. $104,000
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