Homework Answers
Cost of franchise = $2,000,000
Expected life of franchise = 10 years
Annual amortization of franchise = Cost of franchise/Expected life of franchise
= 2,000,000/10
= $200,000
Since franchise was purchased on October 1, amortization expense will be calculated for 3 months in the first year:
Amortization expense for year 1 = Annual amortization of franchise x 3/12
= 200,000 x 3/12
= $50,000
Second option is the correct option
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