Crystal Operates a Business That Provides Typing and Delivery Services

question 79

Essay

Crystal operates a business that provides typing and delivery services. This year Crystal spent $2,500 to purchase special shirts that identify her employees and provide some notoriety for her business. The shirts are especially colorful and include logos on the front pocket and back. Besides salary payments, Crystal also compensates her employees by offering to pay whole life insurance premiums for any that want to provide insurance coverage for their beneficiaries. This year Crystal paid $5,000 in life insurance premiums. What amount of these payments can Crystal deduct? Crystal is on the cash method and calendar year.

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Definitions:

Balance Sheet

A financial statement that displays a company’s financial position at a certain date, listing assets, liabilities, and shareholder equity.

Exchange Rates

The price of one nation's currency expressed in the currency of another nation, used to convert from one currency to another for trade and finance.

Cash

This term refers to money in the form of currency that is used to conduct transactions, make purchases, or settle debts.

Journal Entries

Accounting records that document all the financial transactions of a business, showing the debits and credits for each transaction.