In Transferring a Business to a Corporation, Accounts Receivable Can

question 118

Multiple Choice

In transferring a business to a corporation, accounts receivable can be transferred using either ITA 22 or ITA 85(1) , but not both.One advantage of using ITA 22 is:

• A)The vendor will be able to deduct a capital loss.
• B)The acquiring corporation will be able to deduct a bad debts reserve after the transfer.
• C)The vendor will not have to add back to income any previously deducted reserve.
• D)The vendor will have a loss that may be considered superficial.

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Definitions:

Marginal Cost

Marginal cost refers to the expense of producing one additional unit of a product or service, indicating the efficiency of production processes.

Average Variable Cost

Average variable cost is the total variable costs of production divided by the number of units produced, indicating the average cost of producing each unit excluding fixed costs.

Average Total Cost

The total cost of production divided by the total quantity produced, indicating the cost per unit of output.

Marginal Cost

A measure of the expense associated with manufacturing an additional item of a particular good.