3. Identify the primary term described by each event below: gross income, deprec

Question

3. Identify the primary term described by each event below: gross income, depreciation, operating expense, taxable income, income tax, or net operating profit after taxes a) A new machine had a first-year write-off of $10,500 b) A public corporation estimates that it will report a S-750,000 net profit on its annual income statement An asset with a book value of $8000 was retired and sold for $8450 c) d) An over-the-counter software system will generate $420,000 in revenue this quarter e) An asset with a MACRS recovery period of 7 years has been owned for 10 years. It was just sold for $2750 )The cost of goods sold in the past year was $3,680,200 g) A convenience store collected $33,550 in lottery ticket sales last month. Based on winners holding these tickets, a rebate of S350 was sent to the manager. h) An asset with a first cost of $65,000 was utilized on a new product line to increase sales by $150,000 The cost to maintain equipment during the past year was $641,000

Explanation / Answer

(a) The write off of cost of new machine is known as depreciation.

(b) It is net profit after taxes.

(c) The difference between the sales price and book value is known as the gain on sale of an asset and is part of taxable income.

(d) It is gross income.

(e) The asset's salvage value has been assumed as zero.Hence, the income from its sale comes under taxable income.

(f) It is gross income.

(g) It is taxable income

(h) The asset has paid for its value in this year. The revenue comes under taxable income.

(i) The cost is known as operating expenses.

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