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17 download_doc-13.php - A311 (4/9/2009) Acct standards...

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A311 (4/9/2009) Acct standards generally require expenses to be recognized as a linear function of time if it is unclear how/when the resource is consumed. EXP jt = %Resource j consumed t • HEP j t / T Time at which resource is expected to be fully consumed Graph… 0 <0 0 t T Example : Expense recognition under office lease contract Firm enters into 5 year contract requiring pmts of $100k in YR1, $200k inYR2, …, $500k in YR5. Contract is entered into on 7/1/2008 and $200k in pmts are made before 12/31/2008. Determine prepaid(accrued) rent expense and rent expense for YE 12/31/2008. Rent Expense 12.31 = %Resource consumed 12.31 • HEP = 150k correct measurement .5/5 1,500k Per the firm’s unadjusted general ledger: P(A)RE 12.31 = P(A)RE
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17 download_doc-13.php - A311 (4/9/2009) Acct standards...

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