While She Was a College Student, Angel Lived by a Bookstore

question 19

Essay

While she was a college student, Angel lived by a bookstore located near campus.She thinks a bookstore located on the other side of campus would be successful.She incurs expenses of $42,800 (legal fees, accounting fees, marketing survey, etc.) in exploring its business potential.Her parents have agreed to lend her the money required to start the business.What amount of these investigation costs can Angel deduct if:
a.She opens the bookstore on August 1, 2019.
b.She decides not to open the bookstore.

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Definitions:

Processing Costs

Expenses involved in converting raw materials into finished products, including labor, overheads, and equipment usage.

Equipment Depreciation

The reduction in value of equipment over time due to wear and tear or obsolescence.

Supervisory Expense

Costs associated with managing and overseeing employees or departments, not directly tied to production or service delivery.

Overhead Costs

Expenses related to the day-to-day operations of a business that are not directly tied to the production of goods or services, such as rent, utilities, and administrative salaries.