Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881



Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem

Cost and Amortization of Intangible Assets

On January 2, 2019, Frazier Company purchased a restaurant franchise for $85,000. The terms of the franchise agreement allowed Frazier to have exclusive rights to operate a restaurant under the "Simply Fried" brand name for the next 10 years.


Prepare any journal entries related to the franchise that Frazier should make during 2019.

To determine

Cost of a Intangible Asset: Like, Cost of a Fixed Asset Intangible Assets cost is the cost incurred on acquiring the asset and includes any expenditure which plays an essential role in bringing the asset for the use intended.

To compute:

the cost of the Franchise and pass journal entry.


Cost of a Franchise includes initial price paid to obtain the franchise

Here Cost = $85000

Amortization = 85000/10years = $8500 per year

Journal Entry:

Date Particulars Debit Credit
2.01.2019 Franchise A/c 85000
To Bank/Cash

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