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mary graham has worked as a real estate agent for piedmont properties for 15 years. her annual income is approximately $100,000 per year. mary is considering establishing her own real estate agency. she expects to generate revenues during the first year of $2 million. salaries paid to her employees are expected to total $1.50 million. operating expenses (e.g., rent, supplies, utility services) are expected to total $250,000. to begin the business, mary must borrow $300,000 from her bank at an interest rate of 15%. equipment will cost mary $50,000. at the end of one year, the value of this equipment will be $30,000, even though the depreciation expense for tax purposes is only $5,000 during the first year.

Respuesta :

The pre-tax accounting profit is $170,000. The pre-tax economic profit is $55,000 and the actual depreciation is $20,000.

What does the accounting term depreciation mean?

A non-cash business expense called depreciation is assessed throughout the time that an asset is valuable to your company. By removing the cost of using up a portion of an asset's worth from taxable revenue, every organization can benefit from depreciation.

Which assets are subject to depreciation?

Machines, automobiles, office buildings, buildings you rent out for revenue (both residential and commercial property), and other equipment, such as computers and other technologies, are all examples of depreciable property.

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