Question
Answer the following question: Blue Corp. changed its policy for accounting for certain staff training costs in 20X5. Previously, the costs were capitalized and amortized
Answer the following question:
Blue Corp. changed its policy for accounting for certain staff training costs in 20X5. Previously, the costs were capitalized and amortized straight-line over three years, starting with the year of the expenditure. The new policy is to expense training costs as incurred. A total of $45,000 was spent in 20X3, $0 in 20X4, and $60,000 in 20X5. The 20X5 expense has not yet been recorded, but the $60,000 was capitalized to the intangible asset when the money was spent. The tax rate is 30%.
Show how $35000 was calculated in 20X5 as well as why cumulative effect and cumulative effect, after tax is N/A.
Amortization | Expense | Cumulative Effect | Cumulative Effect, after tax | |
20X3 | 15000 | 45000 | -30000 | -21000 |
20X4 | 15000 | 0 | -15000 | -10500 |
20X5 | 35000 | 60000 | N/A | N/A |
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