During Its First Year of Operations,Sherry's Business Incurred Circulation Expenditures

question 8

Multiple Choice

During its first year of operations,Sherry's business incurred circulation expenditures of $90,000.Since the income of the business is small,Sherry decides to capitalize the expenditures and to amortize them over 3 years for regular income tax purposes.The AMT adjustment for circulation expenditures for the first year of operations is:

• A)$0.
• B)Negative adjustment of $30,000.
• C)Positive adjustment of $30,000.
• D)Positive adjustment of $60,000.
• E)None of the above.

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Definitions:

FIFO

An inventory valuation method where the first items purchased or produced are the first ones sold, affecting the costs of goods sold and ending inventory.

Gross Profit

The difference between sales revenue and the cost of goods sold, before deducting overheads, interest, taxes, and other expenses.

FIFO

First In, First Out, an inventory valuation method where the earliest items added to inventory are the first to be removed, impacting cost of goods sold and inventory valuation.

Costs

The expenses incurred in acquiring or producing goods and services.