In Year 1, Braid Corporation, a Calendar-Year Cash-Basis Corporation, Bought

question 85

Essay

In year 1, Braid Corporation, a calendar-year cash-basis corporation, bought office supplies for the next six months in October for $4,500, paid $6,000 for a three-year insurance policy beginning November 1, and borrowed $200,000 on a five-year 6 percent note receiving proceeds of $198,000 on December 1. What is Braid Corporation's total expense deduction in year 1 for these transactions?

---

Definitions:

Manufacturing Overhead

All the indirect costs associated with producing a product, which may include the cost of utilities, depreciation of manufacturing equipment, and salaries of managerial staff.

Conversion Cost

The combined costs of direct labor and manufacturing overheads that are incurred in the process of converting raw materials into finished goods.

Manufacturing Overhead

Indirect factory-related costs that are incurred when a product is manufactured, including costs like rent, utilities, and maintenance of equipment.

Selling and Administrative Expenses

These are indirect costs that are not directly tied to the production of goods or services, including sales personnel salaries, advertising, and office rent.