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Grape Corporation purchased a machine in December of the current year. This was the only asset purchased during the current year The machine was placed in service in January of the following year. No assets were purchased in the following year. Grape Corporation's cost recovery would begin:_________ a) In the current year using a mid-quarter convention b) In the current year using a half-year convention. c) In the following year using a mid-quarter convention d) In the following year using a half-year convention.

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Answer:

d) In the following year using a half-year convention.

Explanation:

Half year convention in accounting assumes that all assets is made use of in mid year, therefore half year cost recovery is performed for assets in that year.

Half of depreciation is done during the first year and the rest is done during the final year.

In this instance since no cost was invited in the second year we can spread out the cost to the second year by using the half year convention to recognise cost.

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