Ivory Fast Delivery Company, an accrual basis taxpayer, frequently has claims for damages to property the company delivered. Often the claim is not filed until a month after the delivery. In the past, approximately 80% of the claims are paid by Ivory. In 2017, claims for $80,000 were filed. The company refused to pay $20,000 of the claims (because they were not valid), and paid $50,000. The remaining $10,000 in claims were processed and paid in January 2018. Also, in January 2018, claims for $8,000 were filed for deliveries made in 2017, and $6,000 was paid on these claims by March 15, 2018. Ivory has not elected to use the recurring item exception to economic performance. Under the all-events and economic performance tests, Ivory can accrue as an expense for 2017:

Question

Quizplus · Accepted Answer

Under the all-events and economic performance tests, Ivory can only accrue expenses that have been paid or for which economic performance has occurred by the end of 2017. Since $50,000 was paid in 2017, only this amount can be accrued as an expense for that year.

Ivory Fast Delivery Company, an Accrual Basis Taxpayer, Frequently Has