Anthony uses $10,000 from his savings (earning 8% interest) to open his business. After the first year, Anthony incurs a loss of $40,000, which includes the interest that was lost when he withdrew funds from savings. His accounting loss is _____, and his tax expense loss is:

Question

Quizplus · Accepted Answer

The accounting loss is the loss incurred by the business, which includes the interest that was lost when Anthony withdrew funds from savings. The tax expense loss is the loss that is recognized for tax purposes. In this case, the accounting loss is $39,200 and the tax expense loss is also $39,200.

Anthony Uses $10,000 from His Savings (Earning 8% Interest) to Open