Christy purchases $1,000-worth of supplies from a local vendor. The supplies are delivered on March 29, 2014. The supplies are fully used up by year end. Because of unusual circumstances, a bill for the supplies arrives from the vendor on January 10, 2015, and is promptly paid. When can Christy deduct the expenses? I. In 2014, if she is an accrual basis taxpayer. II. In 2015, if she is a cash basis taxpayer.
A) Only statement I is correct.
B) Only statement II is correct.
C) Both statements are correct.
D) Neither statement is correct.

Question

Quizplus · Accepted Answer

An accrual basis taxpayer can deduct expenses in the year they are incurred, so Christy can deduct in 2014. A cash basis taxpayer can deduct expenses in the year they are paid, so Christy can deduct in 2015.

Christy Purchases $1,000-Worth of Supplies from a Local Vendor