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3 years ago

What are the criteria for distinguishing between a deductible expense and a capital expenditure?

1 answer:

6 0

The criteria for distinguishing between whether an expenditure is a capital item or a deductible expense is the useful life of the item.

If the purchase is going to be used and no longer have value at the end of the reporting period it is an expense for that period. If the item is a capital item it is going to have a longer useful life. In this case the item is depreciated over its useful life, assigning an expense amount to each accounting period that the item has value.

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Interest-on-Interest Consider a $1,500 deposit earning 4 percent interest per year for 7 years. How much total interest is earne

valentina_108 [34]

Answer:

Interest earned  = $420

Explanation:

The total worth of the investment after the the investment period compounded at certain rate is called the Future Value.

Future Value= Principal + compounded interest i.e

FV = P × (1+r)^n

r- rate, FV- future value , n- period

FV = ? , P -1,500, r- 4%, n-7 years

FV = 1,500 ×1.04^(7)

FV = 1973.897669

Interest earned (compound intrest) = FV - Principal amount

= 1973.897669 - 1,500

= $473.89

Without interest earning interest.

The amount of interest earned will be computed on the principal only

Interest earned = $1,500× 4%× 7

= $420

7 0

3 years ago

Susan Zupan, a lawyer, accepts a legal engagement in March, performs the work in April, and is paid in May. If Zupan's law firm

UkoKoshka [18]

Answer:

The month of April

Explanation:

Susan Zupan, a lawyer, accepts a legal engagement in March, performs the work in April, and is paid in May. If Zupan's law firm prepares monthly financial statements, the law firm should recognize the revenue in April because according to revenue recognition principle, revenue should be recognized in the accounting period in which services are performed, and Susan zupan performed the work in April so therefore the firm should recognize the revenue in April.

4 0

3 years ago

Following are the accounts and balances from the adjusted trial balance of Stark Company. Notes payable $ 11,000 Accumulated dep

DENIUS [597]

Answer:

STARK COMPANY

INCOME STATEMENT

FOR THE YEAR ENDED DECEMBER 31

PARTICULARS AMOUNT$

Service Revenue 20,000

Less-Expenses

Supplies expense 200

Interest expense 500

Insurance expense 1800

Utilities expense 1300

Depreciation expense 2000

Wages expense 7500

Total expenses 13,300

Net profit $6,700

STARK COMPANY

STATEMENT OF RETAINED EARNINGS

FOR THE YEAR ENDED DECEMBER 31 Amount$

Retained earnings December 31 prior year end 14,800

Add- Net income 6,700

Less- Dividends 3,000

Retained earnings, December 31 Current year end $18,500

8 0

3 years ago

Refer to exhibit 4-1. in a free market, ________ units of the good would be exchanged. with a price ceiling, _______ units of th

solniwko [45]

The answer is option "d. 125; 75".

Free market alludes to an economy where the legislature or government forces few or no confinements and directions on purchasers and sellers. In a free market, members figure out what items are created, how, when and where they are made, to whom they are offered, and at what value—all in light of free market activity.

4 0

3 years ago

Which concept do businesses use to earn income?

Studentka2010 [4]

Answer:

Businesses use three types of profit to examine different areas of their companies.

1. Gross profit subtracts variable costs to revenue for each product line. Variable costs are only those needed to produce each product, like assembly workers, materials, and fuel. It doesn't include fixed costs, like plants, equipment, and the human resources department. Companies compare product lines to see which is most profitable.

2. Operating profit includes both variable and fixed costs. Since it doesn't include certain financial costs, it's also commonly called EBITA. That stands for Earnings Before Interest, Tax, Depreciation, and Amortization. It's the most commonly used, especially for service companies that don't have products.

3. Net profit includes all costs. It's the most accurate representation of how much money the business is making. On the other hand, it may be misleading. For example, if the company generates a lot of cash, and it's invested in a rising stock market, it may look like it's doing well. But it might just have a good finance department, and not be making money on its core products.

Explanation:

4 0

3 years ago