What is the capitalization threshold for additions and betterments to property, plant, and equipment for Kitchen Solvers?
Kitchen_Solvers Franchise · 2025 FDDAnswer from 2025 FDD Document
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Product sales are recognized when the product is shipped, and all obligations of the Company have been satisfied.
Property, Equipment, and Depreciation
Property, plant and equipment is stated at cost. Expenditures for repairs and maintenance are charged to income as incurred. Additions and betterments with a unit acquisition cost of $5,000 or more will be capitalized. The cost and related accumulated depreciation o
Source: Item 21 — Financial Statements (FDD pages 48–49)
What This Means (2025 FDD)
According to Kitchen Solvers' 2025 Franchise Disclosure Document, the company's accounting policy states that expenditures for repairs and maintenance are charged to income as incurred. However, additions and betterments to property, plant, and equipment are treated differently.
Specifically, Kitchen Solvers will capitalize additions and betterments only if they have a unit acquisition cost of $5,000 or more. This means that if a franchisee invests in an improvement or addition to their property, plant, or equipment that costs less than $5,000, it will be expensed immediately. If the cost is $5,000 or greater, it will be recorded as an asset and depreciated over its useful life.
This capitalization threshold is a standard accounting practice. It's important for Kitchen Solvers franchisees to understand this policy because it affects how their investments are recorded and depreciated for tax purposes. The FDD also mentions that the cost and related accumulated depreciation on property, plant, and equipment sold or otherwise disposed of are removed from the accounts, with any gain or loss reported as current year's revenue or expense.