What costs at Lime Bike the bike sharing

What costs at Lime. Bike, the bike sharing service, would be capitalized versus expensed? Original blog posting (March 28, 2017) Copyright © 2017 by Dr. Wendy Tietz. This work is licensed under a Creative Commons Attribution. Non. Commercial 3. 0 Unported License.

Lime. Bike • Start-up founded in San Mateo, California • Allows for bike sharing without having to return the bike to a docking station • Charges $1 per 30 mins, or $0. 50 per ride for students • Operates within cities, independent of government funding • Recently raised $12 million in funding and is set to begin operations in April or May of 2017

Lime. Bike How it works: • Locate a bike close by on the Lime. Bike app • Scan the QR code or enter the bike’s plate number • When finished, park the bike anywhere legal and visible • Press down on the back wheel lock • Trip is finalized and payment processed

Question 1 For this question, that Lime. Bike has officially begun operating its bike sharing program. For each of the following items, identify whether the cost of the item would be expensed or capitalized at Lime. Bike: a. Customized bikes from Trek and Specialized b. Development costs of the app for locating, paying, and returning bikes c. Salary of the salesperson who works to get cities to adopt Lime Bikes program d. Replacement tires for bikes e. Routine bike maintenance including chain lubrication, brake pad replacement, and drivetrain cleaning f. Electricity and other utilities in the administrative offices

Question 2 Why does it matter whether a cost item is expensed or capitalized? Explain.

Question Recap 1. For this question, that Lime. Bike has officially begun operating its bike sharing program. For each of the following items, identify whether the cost of the item would be expensed or capitalized at Lime. Bike: a. Customized bikes from Trek and Specialized b. Development costs of the app for locating, paying, and returning bikes c. Salary of the salesperson who works to get cities to adopt Lime Bikes program d. Replacement tires for bikes e. Routine bike maintenance including chain lubrication, brake pad replacement, and drivetrain cleaning f. Electricity and other utilities in the administrative offices 2. Why does it matter whether a cost item is expensed or capitalized? Explain.

For additional news stories to use in the accounting classroom, see the Accounting in the Headlines blog at http: //accountingintheheadlines. com/ Questions or comments? Contact Dr. Wendy Tietz at wtietz@kent. edu Copyright © 2017 by Dr. Wendy Tietz. This work is licensed under a Creative Commons Attribution. Non. Commercial 3. 0 Unported License.