In 2018, Dargo Inc., a calendar year corporation, accrued a $75,000 year-end bonus payable to its communications director. Dargo and the director are not related parties. Dargo paid the bonus to the director on February 8, 2019. Dargo can deduct the bonus in 2018.

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Quizplus · Accepted Answer

The accrual method of accounting allows for expenses to be deducted in the year they are accrued, even if they are not paid until the following year. Therefore, since Dargo accrued the bonus in 2018, they can deduct it in that year, even though it was not paid until 2019.