Ella Is a Cash- Basis Sole Proprietor Providing Senior Care

question 2184

True/False

Ella is a cash- basis sole proprietor providing senior care services to clients. One of her clients passes away owing her $1,500 for services performed. Ella has been notified that there are no assets in the estate to pay her bill. Ella will be able to recognize a business bad debt.

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Definitions:

Depreciation Expense

An accounting method that allocates the cost of a tangible asset over its useful life, reflecting wear and tear or obsolescence.

Manufacturing Overhead

Manufacturing overhead includes all the indirect costs associated with producing goods, other than direct materials and direct labor, such as utilities, depreciation, and maintenance expenses.

Direct Materials

Raw materials that are directly consumed in the manufacturing of a product and are easily identifiable in the finished product.

Period Cost

Expenses incurred that are not directly tied to production activities, such as selling, administration, and financial costs.