[ 10 ] Alma Knack is a calendar-year, cash-basis farmer who grow in lowa. On Dec

Question

[ 10 ] Alma Knack is a calendar-year, cash-basis farmer who grow in lowa. On December 26 of the current year, Alma purchased a 6-month supply of fee costing $4,000. At the same time, she also purchased a new hybrid variety of sprin purchased on December 26, Alma may deduct in the current year s corn and raises hogs on a large farm d for the hogs seed costing $1,000 for the 8 planting period. Her other farm expenses for the year were $9,000. Of the feed and seed A. Only $1,000. B. Only $4,000. C. Only $4,500. D. All $5,000.

Explanation / Answer

Answer : Option D - All $5,000

Out of the feed amounting $4,000 and Seed amouting $1,000 purchased on December26, Alma may deduct all $5000 in the current year as Alma is following cash basis of accounting and The cash method of accounting records revenue when cash is received, and expenses when they are paid in cash.

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