Mauve Company Signs a 13-Year Franchise Agreement with Mauve Too

Multiple Choice

Mauve Company signs a 13-year franchise agreement with Mauve Too.Mauve Too retained significant powers, rights, and a continuing interest.Mauve Company (the franchisee) makes noncontingent payments of $16,000 per year for the first five years of the franchise.Mauve Company also pays a contingent fee of 1% of gross sales every month.Which of the following statements is correct?

A) Mauve Company may deduct the $16,000 per year noncontingent payments in full as they are made.
B) Mauve Company may deduct the monthly contingent fee as it is paid.
C) Mauve Company may deduct both the noncontingent annual fee and the contingent monthly fees as they are paid.
D) Mauve Company may not deduct either the noncontingent annual fee or the contingent monthly fees as they are paid.
E) None of the above.