Company paid 8 million to acquire a franchise at the beginning of 2005 that was expensed in 2005. If train had elected to capitalize the franchise as an expense and amortize the cost of the franchise over 8 years, What effect would this have on trains 2005 CFO and 2006 Debt to Assets Ratio?
1) Both would be higher with capitalization.
2) Both would be lower with capitalization.
3) One would be higher and one would be lower with capitalization.