Question

On January 2, 2016, Rafa Company purchased a franchise with a useful life of 10 years for $50,000. An additional franchise fee of 3% of franchise operating revenues also must be paid each year to the franchisor. Revenues during 2016 totaled $400,000. In its December 31, 2016, balance sheet, what net amount should Rafa report as an intangible asset-franchise

Answer 1

$45,000

Step-by-step explanation:

Calculation to determine the net amount should Rafa report as an intangible asset-franchise

Acquisition Cost P $50,000

Less: Franchise Amortization $5,000

(P$50,000/10)

Intangible asset-franchise - December 31, 2016 P$45,000

($50,000-$5,000)

Therefore the net amount should Rafa report as an intangible asset-franchise is $45,000