s. T. Potts, the treasurer of Ideal China, has a problem. The company has jus escribed by the supplier as an installation cost. Ms. Potts does not know whe eductible current expense or as a capital investment. In the latter case, the c e years.
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Bha
![Ms. T. Potts, the treasurer of Ideal China, has a problem. The company has just ordered a new kiln for $510,000. Of this sum, $61,000 is
described by the supplier as an installation cost. Ms. Potts does not know whether the company will need to treat this cost as a tax-
deductible current expense or as a capital investment. In the latter case, the company could depreciate the $61,000 straight-line over
five years.
How will the tax authority's decision affect the after-tax cost of the kiln? The tax rate is 25%, and the opportunity cost of capital is 6%.
Note: Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.
Installation cost is expensed at the end of year 1
If installation cost is capitalized and depreciated over 5 years
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