1. Firm B uses the calendar taxable year and the cash method of accounting. On December31, 20x6, Firm B made certain cash payments. To what extent can it deduct the paymentin 20x6? (Please note: payments for assets to be consumed in the following year are fullydeductible in the12 months or less and is consumed by the end of the following year.)yearof payment if the expenditure results in a benefit with a duration ofa) $3,000 compensation to a consultant who spent three weeks in January 20x7 analyzingB's internal control system.b) $500,000 to purchase a new piece of commercial real estate. The equipment wasdelivered on January 8, 20x7 and has a useful life of 40 years.c) $16,900 property tax to the local government for the first six months of 20x7.d) $50,000 for a two-year lease beginning on February 1, 20x7.

CASH BASED ACCOUNTING:- Cash based accounting is referred as the accounting in which the payments…

1. Firm B uses the calendar taxable year and the cash method of accounting. On December 31, 20x6, Firm B made certain cash payments. To what extent can it deduct the payment in 20x6? (Please note: payments for assets to be consumed in the following year are fully deductible in the year of payment if the expenditure results in a benefit with a duration of 12 months or less and is consumed by the end of the following year.) a) $3,000 compensation to a consultant who spent three weeks in January 20x7 analyzing B's internal control system. b) $500,000 to purchase a new piece of commercial real estate. The equipment was delivered on January 8, 20x7 and has a useful life of 40 years. c) $16,900 property tax to the local government for the first six months of 20x7. d) $50,000 for a two-year lease beginning on February 1, 20x7.

1. Firm B uses the calendar taxable year and the cash method of accounting. On December 31, 20x6, Firm B made certain cash payments. To what extent can it deduct the payment in 20x6? (Please note: payments for assets to be consumed in the following year are fully deductible in the year of payment if the expenditure results in a benefit with a duration of 12 months or less and is consumed by the end of the following year.) a) $3,000 compensation to a consultant who spent three weeks in January 20x7 analyzing B's internal control system. b) $500,000 to purchase a new piece of commercial real estate. The equipment was delivered on January 8, 20x7 and has a useful life of 40 years. c) $16,900 property tax to the local government for the first six months of 20x7. d) $50,000 for a two-year lease beginning on February 1, 20x7.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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