Which of the Following Expenditures or Losses Incurred in the Context

question 72

Multiple Choice

Which of the following expenditures or losses incurred in the context of a trade or business activity is deductible at the time it is incurred?

• A)Aaron owns a local restaurant. He pays the local health inspector a fee of $125 per week, as provided by city regulation.
• B)Beth owns a local delivery company and pays $750 in parking fines during the year with respect to her delivery vehicles. These fines were unavoidable in the context of her business activity.
• C)Brad hires the son of the police chief as the night watchman at his business. The son is paid at the same weekly rate as other night watchmen in the area, but he does not show up for work on a regular basis.
• D)Dotty owns a local nightclub that features live music. She pays $4,600 to purchase a full page ad in the local newspaper urging citizens to vote against a noise ordinance in the next election that will force her out of business if passed.

Learn the definition and application of degree of operating leverage (DOL).

Understand the difference between variable costing and absorption costing, and their applications.

Grasp the concepts of sales mix and its significance in CVP analysis.

Comprehend the use of cost-volume-profit (CVP) analysis and charts.

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Definitions:

Electrical Cost

The expense associated with the consumption of electricity in a business or home.

Comparative Income Statement

A financial statement that presents the revenues, expenses, and net income for multiple periods side by side for comparison.

Merchandising Company

A business that purchases finished products and resells them to consumers without further production.

Net Income

The net income a company earns once all costs and taxes are subtracted from its total revenue.