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CCC9 CONTINUING COOKIE CHRONICLE
Part 1
(a)
Aug. 31 Website ............................................
1,800
Cash ..........................................
1,800
(b)
Monthly amortization
$600 ÷ 24 months = $25
(c)
Revised monthly amortization
Original cost .......................................................
$ 600
Less: Accumulated amortization .....................
(225)
(d)
Cost ($600 + $1,800) ..........................................
$2,400
Accumulated amortization: ...............................
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
(a)
Purchase price .....................................................
$38,500
Painting .................................................................
2,500
(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
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
