Operating Losses Incurred During the Start-Up Years of a New

question 9

Multiple Choice

Operating losses incurred during the start-up years of a new business should be

• A) accounted for and reported like the operating losses of any other business.
• B) written off directly against retained earnings.
• C) capitalized as a deferred charge and amortized over five years.
• D) capitalized as an intangible asset and amortized over a period not to exceed 20 years.

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Definitions:

Managers

An advocate for stability and the status quo.

Conception of the World

An individual or collective understanding and interpretation of the world around us, including beliefs about nature, society, and the universe.

Satisfice

To select the first alternative that is “good enough,” because the costs in time and effort are too great to optimize.

Bounded Rationality

A concept suggesting that individuals make decisions based on the limited information available to them and within the constraints of their cognitive capacity.