Scenario 13-8 Ellie Has Been Working for an Engineering Firm and Earning

question 399

Multiple Choice

Scenario 13-8
Ellie has been working for an engineering firm and earning an annual salary of $80,000. She decides to open her own engineering business. Her annual expenses will include $15,000 for office rent, $3,000 for equipment rental, $1,000 for supplies, $1,200 for utilities, and a $35,000 salary for a secretary/bookkeeper. Ellie will cover her start-up expenses by cashing in a $20,000 certificate of deposit on which she was earning annual interest of $500.
-Refer to Scenario 13-8.According to an economist,which of the following revenue totals will yield Ellie's business $50,000 in economic profits?

• A) $55,200
• B) $100,200
• C) $132,500
• D) $185,700

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Definitions:

Scrap Value

The estimated residual value of an asset at the end of its useful life, often used in calculating depreciation.

Oscilloscope

An electronic test instrument that visually displays varying signal voltages, often used for observing the change of an electrical signal over time.

MACRS Tables

Depreciation schedules provided by the Modified Accelerated Cost Recovery System used in the United States for determining the depreciation of assets for tax purposes.

Depreciation Expense

The portion of the cost of a fixed asset that is considered to be consumed or used up in each accounting period, reflecting the decrease in the asset's value over time.