Question

Worldwide Tours Corporation ( WTC) established a new division in 20X8. The mandate of this new division is to establish a presence in the growing luxury eco- tourism travel business. This division will offer, through a sophisticated website, on- line quotes for travel packages to a variety of ecologically interesting locations. The website will include ratings of the various packages, including video clips of locations and interviews with local experts. WTC will underwrite various packages and place clients with other operators, earning a commission. Initial market research indicates that there is a demand for objective information about travel opportunities and increased purchasing over the Internet.
In 20X8, WTC incurred the following costs in relation to the operation:
Manager salaries ( half planning)............. $ 246,000
Rented space..................... 52,000
Software purchased.................. 90,200
Consultant’s fees— graphics design........... 71,800
Computer equipment purchased; four- year life...... 64,800
Operating costs— heat, power, etc. ........... 42,100
Travel and research costs re: travel packages........ 55,800
Preparation of content ................. 63,100
Promotion of website to customers ............ 81,300
The website is just recently up and running at the end of 20X8.
The winter months of 20X9 will be the First real test of the viability of the service.

Required:
1. Provide recommendations as to how to account for the expenditures listed above. Be specific.
2. How would your answer above be different if the website was used only for advertising and promotion of the company?


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  • CreatedFebruary 17, 2015
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