A Driver Started a Business on 1 January 2014, Hiring

question 25

Multiple Choice

A driver started a business on 1 January 2014, hiring out his limousine for special occasions. Current regulations require the business to purchase a license that will expire after two years. The cost of the license is $12,000. Calculate the amount of license expense to be included in the income report for the 6 months ended 30 June 2014.

• A) $12,000
• B) $6,000
• C) $4,000
• D) $3,000

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Definitions:

Rate of Interest

The percentage charged on a loan or paid on savings over a period of time, indicating the cost of borrowing or the gain on savings.

Invested

Refers to funds that have been allocated into assets or projects with the expectation of earning a return.

Worth

The total value of all financial and non-financial assets owned by an individual or business minus any liabilities.

One-time Investment

An investment made in a lump sum, as opposed to investing in smaller, incremental amounts over time.