Dargo Inc., a calendar year corporation, accrued a $75,000 year-end bonus payable to its CEO in 2013. Dargo and the CEO are not related parties. Dargo paid the bonus to the CEO on February 8, 2014. Dargo can deduct the bonus in 2013.

Question

Quizplus · Accepted Answer

According to the accrual method of accounting, expenses can be deducted in the year they are incurred, which in this case is 2013. The fact that the payment was made in 2014 does not affect the deductibility of the expense in 2013.

Dargo Inc, a Calendar Year Corporation, Accrued a $75,000 Year-End Bonus