Question

On January 16, Tree Co. paid $60,000 in property taxes on its factory for the current calendar year. On April 2, Tree paid $240,000 for unanticipated major repairs to its factory equipment. The repairs will benefit operations for the remainder of the calendar year.

What amount of these expenses should Tree include in its third-quarter interim financial statements for the 3 months ended September 30?

A. $95,000 B. $75,000 C. $0 D. $15,000

Answer 1

A. $95,000

Step-by-step explanation:

60,000 will be property taxes for an entire year

we just need to calcualte expense from July to September thus:

60,000 x 3 months / 12 months = 15,000

The repairs are also distributed among the periods to not put the entire weight in a month or quarter:

240,000 x 3 / 9 months outstanding = 80,000

total amount of expenses for the period July - September:

15,000 property tax expense+ 80,000 repair expense= 95,000