How will All States M.E.D. state property and equipment for accounting purposes?
All_States_M_E_D Franchise · 2024 FDDAnswer from 2024 FDD Document
b) Property and Equipment
Property and equipment are stated at cost. Depreciation is computed using the straight line method of depreciation over the estimated useful life of the assets, which are 5 years.
For federal income tax purposes, depreciation is computed using the appropriate accelerated methods allowed for tax purposes.
Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred.
Source: Item 23 — RECEIPTS (FDD pages 44–174)
What This Means (2024 FDD)
According to the 2024 FDD, All States M.E.D. states that property and equipment are recorded at cost. Depreciation is calculated using the straight-line method over an estimated useful life of five years for each asset. This means the initial cost of an asset will be divided evenly over five years to determine the annual depreciation expense.
For federal income tax purposes, All States M.E.D. uses accelerated depreciation methods. This may allow for larger depreciation deductions in the early years of an asset's life, potentially reducing taxable income during those years.
Expenditures that significantly extend the life of the property or equipment are capitalized, meaning they are added to the asset's cost basis and depreciated over time. Regular maintenance and repair costs are expensed as they are incurred, meaning they are deducted from revenue in the period they occur.