While She Was a College Student,Juliet Worked in a Bookstore

question 85

Essay

While she was a college student,Juliet worked in a bookstore located near campus.She thinks a bookstore located on the other side of campus would be successful.She incurs expenses of $41,000 (accounting fees,marketing survey,etc.)in exploring its business potential.Her parents have agreed to loan her the money required to start the business.What amount of these investigation costs can Juliet deduct if:

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Definitions:

Inventory Turnover

A ratio indicating how often a company sells and replaces its stock of goods during a particular period, a measure of efficiency in managing inventory.

Current Ratio

Indicates the extent to which current liabilities are covered by those assets expected to be converted to cash in the near future; it is found by dividing current assets by current liabilities.

Obsolete

Refers to products, technologies, or methods that are out-of-date, no longer usable, or have been replaced by new versions.

Market Value Ratios

Relate the firm’s stock price to its earnings and book value per share.