Dennis Purchased a Machine for Use in His Business

question 50

Multiple Choice

Dennis purchased a machine for use in his business.Mr.Dennis' costs in connection with this purchase were as follows: What is the amount of Mr.Dennis' basis in the machine?

• A)$33,000
• B)$40,400
• C)$41,900
• D)$46,100

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Definitions:

Net Operating

Refers to the profit a company makes from its usual business operations, before taxes and interest, indicating the financial health of the company's core activities.

Short-term Rates

Interest rates applying to loans or debt instruments with maturities typically less than one year; often influences other rates in the economy.

Inventory Conversion Period

The average length of time to convert materials into finished goods and then to sell them; calculated by dividing total inventory by sales per day.

Operating Cycle

The Operating Cycle is the period of time it takes for a business to purchase inventory, sell products, and convert the sales into cash, reflecting the efficiency with which a company manages its core operations.