During 2016, the First Year of Operations, Silver, Inc

question 22

Multiple Choice

During 2016, the first year of operations, Silver, Inc., pays salaries of $175,000. At the end of the year, employees have earned salaries of $20,000, which are not paid by Silver until early in 2017. What is the amount of the deduction for salary expense?

• A)If Silver uses the cash method, $175,000 in 2016 and $0 in 2017.
• B)If Silver uses the cash method, $0 in 2016 and $195,000 in 2017.
• C)If Silver uses the accrual method, $175,000 in 2016 and $20,000 in 2017.
• D)If Silver uses the accrual method, $195,000 in 2016 and $0 in 2017.
• E)None of the above is correct.

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Definitions:

Return On Investment Ratio

A financial metric used to evaluate the efficiency of an investment, calculated by dividing the net profit by the original capital cost of the investment.

Judgmental Factors

Elements that require personal assessment and decision-making in the valuation of assets, determination of liabilities, or other financial reporting activities.

Static Budget

A budget that remains unchanged over the period it covers, regardless of changes in sales volume, production levels, or other external factors, often used for fixed expenses.

Control Costs

The practice of managing and regulating expenses to ensure they do not exceed budgets.