The Baton company projected that the total depreciation expense for the current year is $120,000 and the year-end bonuses to employees is $200,000. In its first quarterly income statement, the expenses related to those two items should be reported $30,000 (option b).
Depreciation measures the decrease of the value of assets.
Depreciation expense is the amount of the cost of a company's fixed assets that is allocated for a specific term. Depreciation expense is recorded as a non-cash expense on the income statement, reducing the company's net income or profit.
In the income statement, the depreciation expense is debited while the accumulated depreciation is credited.
From the problem, we know that the depreciation expense for the current year is estimated to $120,000. Since the income statement is made quarterly, the depreciation expense for the first quarter (ended March 31) is 120,000/4 = 30,000
The expense for the employee's year-end bonuses is one time expense and therefore, not spread into quarterly income statement, only in the last statement.
Hence, the total expenses for those two items should be written as $30,000 (option b).
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