Marsha acquired a franchise to operate a beauty salon from Envincta, Inc., for $88, 000.She incurred an additional $4, 000 in legal costs to negotiate the terms with the franchisor.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.The franchise cost that should be capitalized is

Question

Quizplus · Accepted Answer

The franchise cost that should be capitalized is the initial cost of $88,000 plus any additional costs directly related to the acquisition of the franchise, which includes the $4,000 legal costs. Therefore, the total franchise cost that should be capitalized is $92,000.

Marsha Acquired a Franchise to Operate a Beauty Salon from Envincta