On January 15, 2018, Bonita Industries paid property taxes on its factory buildi
ID: 2531612 • Letter: O
Question
On January 15, 2018, Bonita Industries paid property taxes on its factory building for the calendar year 2018 in the amount of $1096000. In the first week of April 2018, Bonita made unanticipated major repairs to its plant equipment at a cost of $2679000. These repairs will benefit operations for the remainder of the calendar year. How should these expenses be reflected in Bonita's quarterly income statements?
Three Months Ended
3/31/18
6/30/18
9/30/18
12/31/18
$274000
$943750
$274000
Three Months Ended
3/31/18
6/30/18
9/30/18
12/31/18
Explanation / Answer
Solution:
Property tax paid in January for whole year, therefore to be recognized in every quarter = $1,096,000 / 4= $274,000
Repairs to plant and equipment cost incurred in 2nd quarter of 2018 = $2,679,000
As these repair will benefit for remainder of calender year, therefore expense will be recognized in 3 quarters = $2,679,000/3 = $893,000 each quarter
Total expense for quarter ended 31.03.2018 = $274,000
Total expense for quarter ended 30.06.2018 = $274,000 + $893,000 = $1,167,000
Total expense for quarter ended 30.09.2018 = $274,000 + $893,000 = $1,167,000
Total expense for quarter ended 31.12.2018 = $274,000 + $893,000 = $1,167,000
Hence last option is correct.