Mike started a calendar year business on September 1^st of this year by paying 12 months' rent on his shop at $1,000 per month.What is the maximum amount of rent that Mike can deduct this year under each type of accounting method? A) $12,000 under the cash method and $12,000 under the accrual method. B) $4,000 under the cash method and $12,000 under the accrual method. C) $12,000 under the cash method and $4,000 under the accrual method. D) $4,000 under the cash method and $4,000 under the accrual method. E) $4,000 under the cash method and zero under the accrual method.

Question

Quizplus · Accepted Answer

Under the cash method, Mike can deduct the full $12,000 because he paid it in the current year. Under the accrual method, he can only deduct the rent for the months of September to December, totaling $4,000.

Mike Started a Calendar Year Business on September 1st of This

Mike Started a Calendar Year Business on September 1^st of This