Jamison Enterprises acquired a franchise to operate a Good Burger Joint in January, 2013. The cost of the franchise was $360,000 and was estimated to have a limited life of 30 years. Early in the year 2018, the franchise was forced out of business due to lawsuits. Jamison should record which of the following series of expenses to their income statement for the years noted

A) 12,000,

B) 12,000

C) 300,000 from 2013

D) 2014 and 2018 respectively

Answer: A. $12000

Explanation:

Jamison Enterprises acquired a Franchise, The Franchise license is an Asset to Jamison Enterprises because they expect an inflow economic benefits in the form of Revenue from the use of this Franchise license. The Franchise License has a Useful Life of 30 years

The Franchise License would be amortized over a period of 30 year. Intangible assets like franchise License are amortized over their useful life. The same way we depreciate assets like vehicles over their useful life, Think of amortization as The Depreciation for intangible asset.

Amortization expense incurred each year will be calculated by taking Cost of Franchise License and divide it by 30 which is the useful life of the Franchise license. The amortazation expense incurred each year would be 360 000/30 = $12000

An Expense of $12000 will be will be reported on the Income statement each year from 2013 until 2017, amortization expense for 2018 will be adjusted for the number of months the business operated before closing down.

The series of expense that should be recorded in the income statement each year is $12000