CCC9 CONTINUING COOKIE CHRONICLE
Part 1
(a)
Aug. 31 Website ……………………………………..
1,800
Cash ……………………………………
1,800
(b)
Monthly amortization
$600 ÷ 24 months = $25
Accumulated amortization August 31, 2018
9 months X $25 = $225
($600 + $1,800 – $225)
(c)
Revised monthly amortization
Original cost ……………………………………………….
$ 600
Less: Accumulated amortization …………………
(225)
Plus: Additional cost ………………………………….
# of months remaining (24 – 9) …………………….
Revised monthly amortization ……………………..
$ 145
(d)
Cost ($600 + $1,800) ……………………………………
$2,400
Accumulated amortization: ………………………….
Calculated in (b)……………………………………
4 months X $145 …………………………………..
Book value ………………………………………………….
$1,595
CONTINUING COOKIE CHRONICLE (Continued)
Part 1 (Continued)
(e) Costs incurred for website maintenance and insurance are costs
incurred to maintain the operating efficiency of the website and are
therefore recorded as an expense of the period. These costs are
matched to the revenues earned during the period in which these costs
(expenses) are incurred. The generally accepted accounting principle
that plays a part in the recording of these types of transactions is the
expense recognition principle.
Part 2
Purchase price ……………………………………………..
$38,500
Painting ………………………………………………………..
2,500
Shelving ……………………………………………………….
Cost of van ……………………………………………………
$42,500
(b)
Straight-line depreciation
Computation
Annual
End of Year
Year
Depreciable
Cost (a)
Depreciation
Rate (b)
Depreciation
Expense
Accumulated
Depreciation
Book
Value
$42,500
2018
$36,000
20% X 4/12
$ 2,400
$ 2,400
40,100
2019
36,000
20%
7,200
9,600
32,900
2020
36,000
20%
7,200
25,700
2021
36,000
20%
7,200
18,500
2022
36,000
20%
7,200
11,300
2023
36,000
20% X 8/12
4,800
(b) 1/5 = 20%
CONTINUING COOKIE CHRONICLE (Continued)
Part 2 (Continued)
(c) Natalie should use a special accelerated depreciation method for tax
purposes. Using an accelerated method, rather than the straight-line
method, will minimize income tax expenses in the early years of an