Toni Owns a Gourmet Dog Treat Shop Downtown

question 838

Multiple Choice

Toni owns a gourmet dog treat shop downtown. She spends $2,800 investigating opening another dog treat shop in Northtown and an additional $3,100 investigating a new location in Southtown. Toni does open the Northtown shop, but does not open the Southtown shop.

• A) Toni must capitalize and amortize the Northtown investigation costs, but the Southtown investigation costs are not deductible at all.
• B) Both the Northtown and the Southtown investigation costs must be capitalized and amortized.
• C) Both the Northtown and the Southtown investigation costs are currently deductible.
• D) Toni must capitalize and amortize the Northtown investigation costs, but can immediately deduct the Southtown investigation costs.

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Definitions:

Financial Reserves

Funds or assets that are set aside to meet future liabilities, contingencies, or unforeseen expenditures.

Capital

Resources made available for the use in the production of goods or services, often categorized into financial, human, or physical forms.

Conditions

The set of circumstances or criteria that affect financial decisions or the outcome of investments.

Capacity

The maximum level of output that a company can sustain to produce in a given period under normal circumstances.