Debbie Acquired a Franchise to Operate a Donut Shop from Dollar

question 77

Multiple Choice

Debbie acquired a franchise to operate a donut shop from Dollar Donuts, Inc., for $100,000. She incurred an additional $4,000 in legal costs to negotiate the terms with the franchiser. 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. What is the franchise cost that should be capitalized?

• A) $88,000
• B) $92,000
• C) $100,000
• D) $104,000

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