Scenario 1-2

question 58

Multiple Choice

Scenario 1-2. Franky Ferguson has just reached a turning point in his business. He can no longer retain quality employees because he cannot meet his payroll, he does not have an adequate cash flow to pay his current bills, and he is three months behind in his loan payment to the bank. He must close the doors of this business.
-In Scenario 1-2, with the closing of his business, Franky has experienced ______.

• A) business termination
• B) business failure
• C) business closing
• D) business merger

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Definitions:

Double-Declining-Balance Depreciation

A method of accelerated depreciation that applies twice the normal depreciation rate on the declining balance of an asset.

Straight-Line Depreciation

A technique for spreading the expense of a physical asset evenly across its lifespan.

Depreciation Expense

An accounting method used to allocate the cost of a tangible asset over its useful life.

Journal Entry

A journal entry in accounting is a record of a financial transaction, entering it into the accounting records of a business.