Mayo Corp. has estimated that total depreciation expense for the year ending December 31, 2015 will amount to $450,000, and that 2015 year-end bonuses to employees will total $900,000. In Mayo's interim income statement for the six months ended June 30, 2015, what is the total amount of expense relating to these two items that should be reported?
A) $0.
B) $225,000.
C) $675,000.
D) $1,350,000.

Question

Quizplus · Accepted Answer

For interim financial reporting, companies should estimate the annual expenses and then allocate them evenly across the reporting periods. Therefore, for the six months ended June 30, 2015, Mayo Corp. should report half of the estimated annual depreciation expense ($450,000 / 2 = $225,000) and half of the estimated annual bonuses ($900,000 / 2 = $450,000). The total expense for these two items for the six-month period is $225,000 + $450,000 = $675,000.

Mayo Corp Has Estimated That Total Depreciation Expense for the Year