Accounting: Case Study on Maccloud Winery Essay

694 Words Oct 20th, 2010 3 Pages
Case study on MacCloud Winery

Questions
1. Applying the principles of accrual accounting, how should Mike treat the expenditures for the land, vines, vine planting, fertilizing, water? Be specific regarding the treatment over time, including amounts, and the rationale for the treatments.
Answer:
Following the key accrual accounting concepts: Conversation, Realization and Matching, we think Mike should treat the expenditures as follows:
|No. |Item Description |Treatment over time |Rationale for the treatment |
|1 |Building lease $5,000 per year |Expense
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| | |Be depreciated until it is replanted 75years later. | |
|6 |Vines Transportation cost $2,500 |It is an asset and could be computed into vines asset. |it is cost that is necessary to make the vines ready for its intended|
| | | |use |
|7 |Vine planting $2,000*5=$10,000 |It is an asset computed into vines’ |Same as above, it is necessary to make the vine ready for its use. |
| | |When vines are brewed and sold, it becomes as cost of goods sold | |
|8 |Fertilizing and water fee: |expense |these works is to keep the asset (land and vine) in good operating |
| |$1,000*5=$,5000 | |conditions and they did not add capitalized cost of the asset (land |
| |

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