Question

I am a photographer and am claiming a new lens as an asset. I purchased accidental damage warranty coverage on it. Do I include it in the price or claim it as an expense

The lens cost over $1000 and the accidental damage protection cost more than $200

Employee

What is the term of the warranty coverage?

5 year- covers everything but theft or loss

Employee

It's going to be somewhat complicated then, since the 12 month rule doesn't apply. Are you on cash or accrual basis accounting?

cash

Employee

Capitalize (separately) the cash you paid for the warranty and expense it ratably over the life of the policy. It's essentially prepaid insurance.

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