Harrison Company paid the annual fee of $30,000 for an equipment maintenance contract on July 1, the first day of its second quarter and incurred research costs in the same quarter of $12,000.The research did not prove to be fruitful.Harrison should recognize the following expense amount in the second quarter:

Question

Quizplus · Accepted Answer

The equipment maintenance contract is an expense that is recognized over the life of the contract. Since the contract was paid on July 1, the first day of the second quarter, Harrison should recognize $15,000 of expense in the second quarter ($30,000 / 2 quarters). The research costs are also an expense that should be recognized in the second quarter. Therefore, Harrison should recognize a total of $19,500 of expense in the second quarter ($15,000 + $12,000).

Harrison Company Paid the Annual Fee of $30,000 for an Equipment