Bev Is the Sole Owner of Bev & Associates, an Accrual

question 22

Essay

Bev is the sole owner of Bev & Associates, an accrual basis corporation. In 2015, Bev & Associates has a bad year and Bev lends the corporation $50,000 to meet expenses. The corporation accrues interest expense of $5,000 on the loan from Bev, but does not pay the interest to her in cash.
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How much of the $5,000 in accrued interest expense can Bev & Associates deduct on its 2015 corporate tax return? Explain.

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Definitions:

Price Elasticity

A measure of how much the quantity demanded of a good responds to a change in the price of that good, demonstrating the goods' sensitivity to price changes.

Quantity

The amount or number of a material or immaterial good considered as a unit or total.

Perfectly Inelastic

Describing demand that is entirely unresponsive to price changes, represented by a vertical demand curve.

Oysters

Marine mollusks known for their hard shells and edible flesh, often considered a delicacy.