The Chambers Company was formed in early 2017. At the time of formation, Chamber spent the following amounts: accounting fees, $4,000; legal fees, $8,000; stock certificate costs, $3,000; initial franchise fee, $10,000; initial lease payment, $5,000; promotional fees, $3,000. Chamber intends to capitalize and amortize intangibles over the maximum allowable period in accordance with generally accepted accounting principles. Based on this strategy, what is Chambers's expense associated with organization costs in 2017?
A) $ 6,000
B) $18,000
C) $28,000
D) $33,000

Question

Quizplus · Accepted Answer

The organization costs include accounting fees, legal fees, stock certificate costs, initial franchise fee, initial lease payment, and promotional fees, which totals to $33,000. According to generally accepted accounting principles, these intangible costs are capitalized and amortized over a maximum allowable period. Therefore, the expense associated with organization costs in 2017 will be $18,000 ($33,000 / maximum allowable period).

The Chambers Company Was Formed in Early 2017