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AFA Limited ("AFA") owns and operates a number of fast food stores, half of which are operated under franchise from a global company Ball Ball Company (BBC).
AFA has incurred the following expenditures in the year ended 31 July 2022:
Franchise fees of $150,000 paid to BBC for the establishment of a new food store.
Advertising costs of $85,000 incurred prior to the opening of the new food store.
Advise and explain to the management of AFA whether the above expenditures can be capitalized as intangible assets in the statement of financial position for the year ended 31 July 2022. Prepare the journal entries in respect of these expenditures.
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