In the medical expenses example, how much was incurred in 2005?

In the medical expenses example, how much was incurred in 2005?

• A. $600
• B. $1,200
• C. $800
• D. $1,000

Answer: (B)

The main idea is understanding what “incurred” means in the context of medical expenses. When we say an expense is incurred in a given year, we’re counting the costs for services that were received or billed during that year, typically on an accrual basis. In this example, all medical services that occurred in 2005 add up to twelve hundred dollars, so that is the amount incurred for 2005. This total reflects the year the services happened (not when they were paid), and it would exclude costs from other years even if payments were made in 2005 or 2006.

The main idea is understanding what “incurred” means in the context of medical expenses. When we say an expense is incurred in a given year, we’re counting the costs for services that were received or billed during that year, typically on an accrual basis. In this example, all medical services that occurred in 2005 add up to twelve hundred dollars, so that is the amount incurred for 2005. This total reflects the year the services happened (not when they were paid), and it would exclude costs from other years even if payments were made in 2005 or 2006.