Keagan Company, a calendar year taxpayer, incurred $1,490 of long-distance telephone charges in December 2016 and mailed a check to the telephone company on January 4, 2017. If Poole is an accrual basis taxpayer, it reports a $1,490 tax deduction in 2017.

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According to the accrual basis of accounting, expenses are recognized when incurred, regardless of when they are paid. Therefore, Keagan Company would report a tax deduction for the long-distance telephone charges in 2016, the year in which they were incurred.

Keagan Company, a Calendar Year Taxpayer, Incurred $1,490 of Long-Distance