Required information The following information applies to the questions displaye

Question

Required information The following information applies to the questions displayed below. Rebecca is a calendar-year taxpayer who operates a business. She made the following business-related expenditures in December of year O Indicate the amount of these payments that she may deduct in year O under both the cash method of accounting and the accrual method of accounting. (Leave no answers blank. Enter zero if applicable.) d. $2,575 for interest on a short-term bank loan relating to the period from December 1, year O, through April 30, year 1. Answer is complete but not entirely correct uctible Cash method 700 Accrual method 700

Explanation / Answer

Under cash method $2,575 will be recorded because interest expenses are incurred in December. ( if interest is paid in April then 0 amount will come because no expenses are incurred in this year)

Under accrual basis $515 will come because The accrual concept in accounting means that expenses and revenues are recorded in the period they occur, whether or not cash is involved.therefore expense incurred $2,575*1/5=$515 for the month of December.

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