Due to a shortage of cash,East Coast Entertainment Company,an accrual basis taxpayer,could not pay its November 2017 utility bill on time.In February of 2018,East Coast Entertainment pays the utility bill.
I.East Coast can deduct the expense on either its 2017 or 2018 tax return.
II.East Coast cannot deduct the utility expense in 2017 because it is paid in 2018.

A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.

Question

Due to a shortage of cash,East Coast Entertainment Company,an accrual basis taxpayer,could not pay its November 2017 utility bill on time.In February of 2018,East Coast Entertainment pays the utility bill.
I.East Coast can deduct the expense on either its 2017 or 2018 tax return.
II.East Coast cannot deduct the utility expense in 2017 because it is paid in 2018.
​
A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.

Quizplus · Accepted Answer

The Answer of Due to a shortage of cash,East Coast Entertainment Company,an accrual basis taxpayer,could not pay its November 2017 utility bill on time.In February of 2018,East Coast Entertainment pays the utility bill.
I.East Coast can deduct the expense on either its 2017 or 2018 tax return.
II.East Coast cannot deduct the utility expense in 2017 because it is paid in 2018.
​
A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.

Due to a Shortage of Cash,East Coast Entertainment Company,an Accrual