Color, Inc., is an accrual basis taxpayer.In December 2013, the company received from a customer a $500 claim for defective merchandise.Color paid the customer in January 2014. Also, in December 2013, the company received a bill of $800 for office supplies that had been purchased and used in November 2013.The bill was not paid until January 2014. In January 2014, the company received a claim for $600 for defective merchandise purchased in 2013.Color paid the customer the $600 in February 2014.Assuming Color uses the recurring item exception to economic performance, the company's deductions for 2013 as a result of the above are:
A)$500.
B)$600.
C)$800.
D)$1,300.
E)$1,900.

Question

Quizplus · Accepted Answer

Under the recurring item exception, Color, Inc. can deduct the $500 claim paid in January 2014 and the $800 bill for office supplies used in 2013, totaling $1,300 for 2013.