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General Accounting Discussions: Capitalization of Demo Unit

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    • CommentAuthorMikeDBMan
    • CommentTimeJan 13th 2010
     
    We have an $80,000 finished unit that is being used by our sales people as a demo. It is installed at a site and people come and look at it before making buying decisions. Production wants the $80,000 out of their finished inventory. They want to expense it to sales & marketing. I think it should be capitalized as a fixed asset and depreciated. What do you think?
  2.  
    Mike DB your question is quite interesting and question and i appreciate your way of advertisement. Its nice to spend more money but you also have to make your service or product quality wise very strong!
    Am i rite?
    • CommentAuthorpk
    • CommentTimeJan 14th 2010
     
    Hi MikeDBMan,

    You may consider the following entry:

    Debit : Prepaid Advertisement Expenditure
    Credit : Inventory

    Then amortize the Prepaid Advertisement Expenditure monthly over a period in which the benefit is derived.


    savin.yakeep@yahoo.com

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