Chapter 5, Problem 66P

Joy incurs the following expenses in her business. When can she deduct the expenses if she uses the accrual method of accounting? the cash method?

1. a. Joy rents an office building for $750 a month. Because of a cash flow problem, she is unable to pay the rent for November and December 2019. On January 5, 2019, Joy pays the $2,250 rent due for November, December, and January.
2. b. Joy borrows $60,000 on a 1-year note on October 1, 2019. To get the loan, she has to prepay $6,200 in interest.
3. c. Joy owes employees accrued wages totaling $20,000 as of December 31, 2019. The accrued wages are paid in the regular payroll on January 5, 2020.
4. d. Joy purchases $2,400 worth of supplies from a local vendor. The supplies are delivered on January 29, 2019. They are fully used up on December 30, 2019. Because of unusual circumstances, a bill for the supplies arrives from the vendor on January 10, 2020, and is promptly paid.
5. e. While at a trade convention, Joy purchases some pens and paperweights to send out as holiday gifts to her clients. She charges the $700 cost to her credit card in December 2019. She pays the credit card bill in January 2020.