Sergio purchases $3,000-worth of supplies from a local vendor.The supplies are delivered on April 1,2013.The supplies are fully used up on December 31,2013.Because of unusual circumstances,a bill for the supplies arrives from the vendor on February 1,2014,and is promptly paid.When can Sergio deduct the expenses?
I.In 2013,if he is an accrual basis taxpayer.
II.In 2013,if he is a cash basis taxpayer.
A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.

Question

Quizplus · Accepted Answer

If Sergio is an accrual basis taxpayer, he can deduct the expenses in 2013 because the expenses were incurred in 2013 when the supplies were used up. However, if he is a cash basis taxpayer, he can only deduct the expenses when he actually paid for them, which was in 2014 when the bill was paid.

Sergio Purchases $3,000-Worth of Supplies from a Local Vendor