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. Students receive a discounted rate of $0.50 per ride.
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 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.
You are one of the only accountants in LimeBike headquarter's office.
The company’s CEO, Toby Sun, has tasked you with forming the company's the company’s accounting policies.
For the discussion post, write an email to the company CEO and address all of the following typical company scenarios and whether each item should be expensed or capitalized at LimeBike:
The cost of customized bikes. This includes the bike's purchase price, shipping, assembly and sales tax.
Development costs of the smart phone app for locating, paying, and returning bikes. (Resource: Accounting for Software Development)
Salary of the salesperson who works to get cities to adopt the Lime Bike program.
Replacement tires for bikes.
Routine bike maintenance including chain lubrication, brake pad replacement, and drive train cleaning
Electricity and other utilities in administrative offices
Somewhere in your email, also address why this classification is important. Be sure to include how these decisions would impact the company’s balance sheet and income statement.