Question

1. You are the vice president of rides and attractions at Cedar Point. Assume that Forbidden Frontier will cost $5 million to construct in late 2018 and that the attraction will open in 2019. Will your 2018 division income contain an expense of $5 million for the construction of Forbidden Frontier? Explain.
2. As part of management for Cedar Point, why is it important to understand expense recognition principles?
3. What general ledger account will the initial cost of the Forbidden Frontier attraction be posted to?
4. What financial statement does that general ledger account in #3 appear on?

Answer 1

Expense recogintion is very Important because with recognition company can find out proper proifts and correct financial position of the company.

Expense is recognised always even that is incurred current year, next year. because this rule that it will be shown in the books of account.

as per question Forbidden Frontier , Expensed $5 million as Construction thus that will be recognied in the books of account. because expense should be recognised even that is not paid or incurred.

Inital Cost of Forbidden Frontier:

it is capital investment. so should be capitalised in the books of account.