The Shane Company began business early in 2016, when Shane paid an initial fee of $100,000 to purchase a franchise. In forming the company, Shane also spent $11,000 on legal fees and $4,500 on accounting fees. During the year, Shane spent $7,500 on product development and paid $10,000 in continuing franchise fees. What amount should Shane capitalize for intangible assets in 2016?
A) $100,000
B) $115,500
C) $123,000
D) $133,000

Question

Quizplus · Accepted Answer

The $100,000 initial franchise fee should be capitalized as an intangible asset. The legal and accounting fees are also typically capitalized as part of the cost of acquiring the franchise, but in this scenario, only the initial franchise fee is mentioned as being capitalized. The product development and continuing franchise fees are considered operational expenses and should not be capitalized.

The Shane Company Began Business Early in 2016, When Shane