Bruce Operates an Illegal Drug Business

question 167

Multiple Choice

Bruce operates an illegal drug business. Which of the following is deductible?

• A)Commissions paid to dealers.
• B)Rent for a warehouse.
• C)Bribes paid to local police.
• D)Cost of drugs sold.
• E)Interest on debt to finance the purchase of inventory.

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Definitions:

Adjusting Entry

An accounting entry made in the books at the end of an accounting period to allocate revenues and expenditures to the period in which they actually occurred.

Accrued Expenses

Expenses that have been incurred but not yet paid or recorded in the financial statements, representing future obligations.

Accrued Revenue

Revenue that has been earned but not yet received in cash or recorded by the accounting system.

Reversing Entries

Reversing entries are journal entries made at the beginning of an accounting period to negate the effects of certain adjustments made in the previous period.