Expense Recognition at Amazon

• Values:

• Prepaid Expenses: $200,000
• Amortization Period: 5 years
• Annual Amortization Expense: $40,000
• Requirements:

0. Apply the conservatism principle to expense recognition.
1. Calculate annual amortization expense using straight-line method.
2. Discuss the importance of matching expenses to revenues at Amazon.
3. Analyze the impact of amortization on Amazon’s profitability.