Keagan Company, a calendar year taxpayer, incurred $1,490 of long-distance telephone charges in December 2018 and mailed a check to the telephone company on January 4, 2019. If Poole is an accrual basis taxpayer, it reports a $1,490 tax deduction in 2019.

Question

Quizplus · Accepted Answer

Since Keagan Company is an accrual basis taxpayer, it should have recorded the telephone charges as a tax deduction in December 2018 when it incurred the expense, even if it paid for it in January 2019. Therefore, the deduction should be reported in 2018, not 2019.

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