A is corrent. The requirement is to determine the amount of expenses that should be included in the third quarter interim financial statements. ASC Topic 270 states that expenditures which clearly benefit more than one interim period may be allocated among the periods benefited. The major repairs were paid in the second quarter and benefited three quarters, the current and the next two. Therefore, the repairs expense of $80,000 ($240,000/3) should be allocated to the current quarter. Property taxes of $60,000 are allocated to four quarters at $15,000 ($60,000/4) per quarter. Therefore, the correct answer is $95,000 ($80,000 + $15,000) to be allocated to the third quarter.
B is incorrect. ASC Topic 270 states that expenditures which clearly benefit more than one interim period may be allocated among the periods benefited. The major repairs were paid in the second quarter and benefited three quarters, the current and the next two. Therefore, the repairs expense of $80,000 ($240,000/3) should be allocated to the current quarter. Property taxes of $60,000 are allocated to four quarters at $15,000 ($60,000/4) per quarter. Therefore, the correct answer is $95,000 ($80,000 + $15,000) to be allocated to the third quarter.
C is incorrect. ASC Topic 270 states that expenditures which clearly benefit more than one interim period may be allocated among the periods benefited. The major repairs were paid in the second quarter and benefited three quarters, the current and the next two. Therefore, the repairs expense of $80,000 ($240,000/3) should be allocated to the current quarter. Property taxes of $60,000 are allocated to four quarters at $15,000 ($60,000/4) per quarter. Therefore, the correct answer is $95,000 ($80,000 + $15,000) to be allocated to the third quarter.
D is incorrect. ASC Topic 270 states that expenditures which clearly benefit more than one interim period may be allocated among the periods benefited. The major repairs were paid in the second quarter and benefited three quarters, the current and the next two. Therefore, the repairs expense of $80,000 ($240,000/3) should be allocated to the current quarter. Property taxes of $60,000 are allocated to four quarters at $15,000 ($60,000/4) per quarter. Therefore, the correct answer is $95,000 ($80,000 + $15,000) to be allocated to the third quarter.
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