How does Bens Soft Pretzels account for property and equipment?
Bens_Soft_Pretzels Franchise · 2025 FDDAnswer from 2025 FDD Document
Property and equipment are recorded at cost less accumulated depreciation. Major additions and improvements are capitalized if they extend the life of an asset, while maintenance and repairs are expensed as incurred. The cost of assets retired or otherwise disposed of, and the related accumulated depreciation are eliminated from the accounts in the year of disposal with any resulting gain or loss reflected in earnings.
December 31, 2024, 2023, and 2022
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Depreciation
Depreciation of property and equipment is computed primarily using the straight-line method over the following estimated useful lives of the assets:
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 46)
What This Means (2025 FDD)
According to the 2025 FDD, Bens Soft Pretzels records property and equipment at cost, subtracting accumulated depreciation. When Bens Soft Pretzels makes significant additions or improvements that extend the life of an asset, these are capitalized. This means the cost is added to the asset's balance sheet value and depreciated over its remaining useful life. Regular maintenance and repairs, however, are expensed as they are incurred, meaning they are deducted from revenue in the period they happen.
When Bens Soft Pretzels disposes of or retires an asset, the cost of the asset and its related accumulated depreciation are removed from the accounts in the year of disposal. Any gain or loss resulting from this disposal is then reflected in the company's earnings for that year. This process ensures that the balance sheet accurately reflects the value of the assets Bens Soft Pretzels owns, while the income statement captures any financial impact from changes in those assets.
Depreciation for Bens Soft Pretzels' property and equipment is calculated primarily using the straight-line method. This method evenly distributes the cost of an asset over its estimated useful life. The FDD does not specify the exact useful lives that Bens Soft Pretzels uses for different types of assets. Prospective franchisees may want to ask Bens Soft Pretzels for a detailed breakdown of these useful lives to understand how depreciation expenses are calculated, as this can impact the profitability of the franchise.