Question

King Company was organized in late 2016 and began operations on January 2, 2017. prior to the start of operations, it incurred the following costs:
Cost of hiring new employees$3000
Attorney's fees in connection with the organization of the company $12000
improvements to leases offices prior to occupancy (10 year lease) $6000
coasts of pre-opening advertising $5000.
1. what amount should the company expense in 2016.
what amount should the company expense in 2017.

Answer 1

Preopening start-up costs will include the following and would be eligible for amortization
for a period of 180 months beginning from the year in which the actual operations of the
company begin
Cost of hiring new employee	$3,000
Improvement to leases office prior to occupancy	$6,000
Attorney;s fess in connection to the organozation of company	$12,000
Total startup costs	$21,000
Following costs are not treated as start-up costs and would be trated as expense in the
year they were incurred.
Cost of hiring new employee	$5,000
Total expenses	$5,000
The company would expense the following amount in 2016
Cost of hiring new employee	$5,000
In the year 2017 the company would amortize the start-up costs over a period of 180
months.
The amortization expenses for the year 2017 would be as under:
Total startup costs	$21,000
Amortization period in months	$180
Monthly amotization expense	$117
Annual amotization expense	$1,400
The company would expense the following amount in 2017
Amortization of start-up costs	$1,400