Color,Inc.,is an accrual basis taxpayer.In December 2012,the company received from a customer a $500 claim for defective merchandise.Color paid the customer in January 2013.Also,in December 2012,the company received a bill of $800 for office supplies that had been purchased and used in November 2012.The bill was not paid until January 2013.In January 2013,the company received a claim for $600 for defective merchandise purchased in 2012.Color paid the customer the $600 in February 2013.Assuming Color uses the recurring item exception to economic performance,the company's deductions for 2012 as a result of the above are:

Question

Quizplus · Accepted Answer

Under the accrual method and the recurring item exception, Color, Inc. can deduct the $500 claim paid in January 2013 and the $800 bill for office supplies used in 2012, totaling $1,300 for 2012. The $600 claim paid in February 2013 is not deductible for 2012.

Color,Inc,Is an Accrual Basis Taxpayer