A Firm Has Just Ended Its Calendar Year Making a Sale

question 96

Multiple Choice

A firm has just ended its calendar year making a sale in the amount of $200,000 of merchandise purchased during the year at a total cost of $150,500. Although the firm paid in full for the merchandise during the year, it is yet to collect at year end from the customer. The possible problem this firm may face is ________.

• A) high taxes
• B) lack of cash flow
• C) inability to receive credit
• D) high leverage

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Definitions:

Moving Expenses

are costs associated with relocating for work which, under certain circumstances, may be deducted from taxable income.

Deductibility

The ability of a particular expense to be subtracted from gross income, thereby reducing taxable income.

For AGI Deduction

Deductions that are subtracted from gross income to arrive at adjusted gross income, potentially lowering taxable income.

Health Insurance Premiums

The amount paid periodically to a health insurer for coverage of medical expenses.