Jaboy IncWas Incorporated Three Years Ago

question 47

Multiple Choice

Jaboy Inc.was incorporated three years ago.In its first year,Jaboy capitalized $72,000 organizational and start-up costs for tax purposes.However,it expensed these costs for financial statement purposes.Which of the following statements is true?

• A)As a result of the accounting difference three years ago,Jaboy has a $4,800 favorable book/tax difference in the current year.
• B)As a result of the accounting difference three years ago,Jaboy has a $4,800 unfavorable book/tax difference in the current year.
• C)The accounting difference three years ago has no book/tax consequence in the current year.
• D)None of the above is true.

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Definitions:

Total Cost

The complete sum of all expenses incurred in the production and delivery of goods or services.

Marginal Cost

The additional expense faced by a business when its production volume is increased by a single unit.

Total Variable Cost

The aggregate of costs that vary in relation to the volume of output or activity, such as materials and labor expenses.

Total Fixed Cost

The sum of all costs that do not change with the level of output in the short term.