A driver started a business on 1st of January 2018, hiring out his limousine for special occasions. Current regulations require the business to purchase a license that will expire after two years. The cost of the license is $16,000. Calculate the amount of license expense to be included in the income statement for the 6 months ended 30 June 2018.
A)$6,000.
B)$4,000.
C)$3,000.
D)$12,000.

Question

Quizplus · Accepted Answer

The license cost of $16,000 covers two years, so the monthly expense is $16,000 / 24 = $666.67. For 6 months, the expense is $666.67 * 6 = $4,000.

A Driver Started a Business on 1st of January 2018