Question

Bill Stills started a franchise of Happy Burger in his hometown, which has been successfully operating for the past 4 years. Glen, the new accountant for the franchise, received a bill for the current year’s franchise payments due to the corporate headquarters and recorded these costs as a part of the franchise asset. Was Glen's entry correct? Why or why not?

Answer 1

Yes Glen's entry is correct, Because Franchise cost is considered as Assets of the copmany and it is showing in balance sheet in Assets section under head Intengible Assets as a Franchise Fee.

Therefore the entry done by Glen's is correct since he is also recording the same under Assets category.

I hope this clear your doubt.

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