Use the Information Below to Answer the Following Question(s)

question 81

Multiple Choice

Use the information below to answer the following question(s) .N-C Associates is in the process of evaluating its new client services for the business consulting division.Estate Planning, a new service, incurred $600,000 in development costs and employee training.The direct costs of providing this service, which is all labour, averages $100 per hour.Other costs for this service are estimated at $2,000,000 per year.The current program for estate planning is expected to last for two years.At that time a new law will be in place which will require new operating guidelines for the tax consulting.Customer service expenses average $400 per client, with each job lasting an average of 400 hours.The current staff expects to bill 40,000 hours for each of the two years the program is in effect.Billing averages $140 per hour.
-What is the N-C Associates' life-cycle operating income (loss) ?

• A)$(1,480,000)
• B)$(1,440,000)
• C)$(2,080,000)
• D)$11,200,000
• E)$5,600,000

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Definitions:

Consolidation Entry

A journal entry used in the preparation of consolidated financial statements to eliminate intercompany transactions and balances.

Retained Earnings

The portion of net income that is retained by the company rather than distributed to its shareholders as dividends.

Equity Method

An accounting technique used to record investments in other companies, recognizing income based on the investee's profit or loss.

Depreciation Purposes

The allocation of the cost of a tangible asset over its useful life for accounting and tax purposes, reflecting its consumption, wear and tear, or obsolescence.