In Which of the Following Situations Would the Largest Amount

question 7

Multiple Choice

In which of the following situations would the largest amount be recorded as an expense of the current year? (Assume accrual basis accounting. )

• A)$4,000 is paid in January for equipment with a useful life of four years.
• B)$1,800 is paid in January for a two-year fire insurance policy.
• C)$1,200 cash dividends are declared and paid.
• D)$900 is paid to an attorney for legal services rendered during the current year.

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Definitions:

Marginal Revenue

The extra revenue obtained by selling an additional unit of a product or service.

Marginal Cost

The increase in cost resulting from the manufacture of one extra product or service unit.

Average Total Cost

The total cost of production divided by the quantity produced, including both fixed and variable costs.

Total Profit

The total income a business earns after subtracting all expenses, taxes, and costs associated with producing and selling its goods or services.