Expense Recognition Computer Supply Company operates a number of large computer supply stores that sell all types of computer supplies and equipment at discount prices to individuals and small businesses. The company prepares financial statements at the end of each calender year.

For each of the following, state the nature of the benefit you would expect the company to receive from incurring the cost, how much of the cost should be recognized as an expense in the current year, and how much should be recognized as an expense in the following year.

a. A two-year insurance policy is purchased for $12,000 on October 1 of the current year.

b. A two-year $8,000 loan with 9 percent annual interest is taken out on July | of the current year.

c. A payment of $9,000 is made March 31 as prepayment on a one-year lease for a storage facility. The lease starts April 1.

d. An information networking system costing $35,000 is put in service on July | of the current year. The system is expected to be used for five years.

e. During the current year, the company had goods available for sale to customers that cost a total of $836,000. Of that amount, goods costing $772,600 were sold for $815,750.

The remaining goods were sold in the following year.