What costs at LimeBike, the bike sharing service, would be capitalized versus expensed?

Source: https://www.limebike.com/

LimeBike is a start-up founded in 2017 located in San Mateo, California. Its mission is to make shared bicycles accessible and affordable.  The company has taken the basic idea of shared bicycles and eliminated the need to return the bike to a docking station, which may not be near the cyclist’s destination. LimeBike charges $1 per 30 minutes of riding, or $0.50 per ride for students.

To use LimeBike, you first use the LimeBike app to locate one of the citrus-colored bikes near your location. Once you are at the bike, you scan the QR code on the bike or enter the bike’s plate number into the app to unlock the bike. When you are finished using the bike, you park the bike by a bike rack or post – anywhere that is legal and visible. Once you press down the back wheel lock, the trip is finalized and your payment is processed – all within the LimeBike app.

LimeBike operates the bicycle networks within cities, eliminating the need for cities to maintain the bikes or deal with other logistics. The shared bicycle network is not dependent on government funding, making it appealing to cities with tight budgets.

LimeBike just came out of stealth mode and raised $12 million in funding from investors to expand its operations. It is set to begin operating in as-of-yet undisclosed cities in April or May of 2017.

Questions

1. For this question, that LimeBike 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 LimeBike:

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

Instructor Resources

These resources are provided to give the instructor flexibility for use of Accounting in the Headlines articles in the classroom. The blog posting itself can be assigned via a link to this site OR by distributing the student handout below. Alternatively, the PowerPoint file below contains a bullet point overview of the article and the discussion questions.

• Student handout (pdf) (word) (contains entire blog posting + discussion questions)
• PowerPoint file (brief article overview + discussion questions)

This work is licensed under a Creative Commons Attribution-NonCommercial 3.0 Unported License.