In January 2015, Post, Inc. estimated that its year-end bonus to executives would be $840,000 for 2015. The actual amount paid for the year-end bonus for 2014 was $770,000. The estimate for 2015 is subject to year-end adjustment. What amount, if any, of expense should be reflected in Post's quarterly income statement for the three months ended March 31, 2015?

Question

Quizplus · Accepted Answer

The expense for the quarterly income statement should reflect one quarter of the estimated annual bonus, which is $840,000 / 4 = $210,000. This is because expenses should be matched with the period in which they are incurred to accurately reflect the company's financial performance.