Christy purchases $1,000-worth of supplies from a local vendor. The supplies are delivered on March 29, 2018. The supplies are fully used up by year end. Because of unusual circumstances, a bill for the supplies arrives from the vendor on January 10, 2019, and is promptly paid. When can Christy deduct the expenses?
I.In 2018, if she is an accrual basis taxpayer.
II.In 2019, if she is a cash basis taxpayer.

Question

Christy purchases $1,000-worth of supplies from a local vendor. The supplies are delivered on March 29, 2018. The supplies are fully used up by year end. Because of unusual circumstances, a bill for the supplies arrives from the vendor on January 10, 2019, and is promptly paid. When can Christy deduct the expenses?
I.In 2018, if she is an accrual basis taxpayer.
II.In 2019, if she is a cash basis taxpayer.
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Quizplus · Accepted Answer

Both statements are correct because accrual basis taxpayers can deduct expenses when they are incurred (in this case, 2018 when the supplies were delivered and used), while cash basis taxpayers deduct expenses when they are paid (in this case, 2019 when the bill was paid).

Christy Purchases $1,000-Worth of Supplies from a Local Vendor