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Lina20 [59]
3 years ago
6

In the current year, Jerry signed a 5-year lease to rent space to the MacBee restaurant. That year, MacBee paid Jerry $24,000 fo

r the first year’s rent and $24,000 for the last year’s rent. Jerry reports his income using the accrual method of accounting.
How much of the $48,000 is included in Jerry’s current-year income?

A. $ 24,000
B. $120,000
C. $ 48,000
D. $ 0
Business
1 answer:
WARRIOR [948]3 years ago
3 0

Answer:

A. $ 24,000

Explanation:

Given that Jerry received $24,000 for the first year’s rent and $24,000 for the last year’s rent, the amount received for the first year's rent is the amount earned by Jerry in the first year and as such is recognized as the income for the year.

The $24,000 received as rent for the last year is not an earned income but a deferred income. It may also be called unearned revenue and is accounted for as a liability until it is earned (in the last year).

As such, only $24,000 of the $48,000 received is included in Jerry’s current-year income.

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"The answer is $106".

After tax cost of debt               6%
Dep per year                          1600
Tax sav from dep                   640
cost of owning       0               1
interest                                  -480
tax saving                               192
maintence                                 -240
maintenece saving                     96
Depn tax saving                          640
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net cash cost                              208
PV cost of owning (6%)             -3474
cost of leasing
lease payment                           -2100
Tax savings from lease                840
net cash cost                           -1260
PV cost lease 6%                     -3368
PV cost own - Pv cost lease       106
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List three disadvantages to sole proprietorships.
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<span>unlimited liability is one of the main ones, It is difficult to find outside investors and you are liable for all of your own debts</span>
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