In the Current Year, Paul Acquires a Car for $16,000

question 144

Multiple Choice

In the current year, Paul acquires a car for $16,000. He uses the car in his advertising business and for personal purposes. His records indicate the car is used 60% for business and that the total operating expenses, including depreciation, are $4,700. Paul expects to use the car for 5 years in his business. What amount can Paul deduct as the operating costs of the car?

• A)$- 0 -
• B)$2,400
• C)$2,820
• D)$4,700
• E)$12,000

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Definitions:

NPV

Net Present Value, a financial metric that evaluates the profitability of an investment by calculating the difference between the present value of cash inflows and outflows.

Operating Lease

An agreement permitting the utilization of an asset without transferring ownership rights to the user.

Operating Leases

Lease agreements that allow for the use of an asset but do not convey rights of ownership, typically involving shorter-term leases with lower payments.

Financial Leases

Long-term leases that are effectively a method of borrowing to acquire equipment or vehicles, with lessee payments covering the asset's full value plus interest over the lease term.