Becky Is a Cash Basis Taxpayer with the Following Transactions

question 9

Multiple Choice

Becky is a cash basis taxpayer with the following transactions during her calendar tax year: $\begin{array}{l}\text { Cash basis revenue}&\$ 54,000\\\text {Cash basis expenses, except rent }& \$ 25,000\\\text { Rent expense (paid on December } 1 \text { ) for use of a building for } 18 \text { months }&\$36,000\end{array}$
What is the amount of Becky's taxable income from her business for this tax year?

• A)$17,000
• B)$23,000
• C)$25,000
• D)$27,000
• E)None of the above

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Definitions:

Production Costs

The total expenses incurred in the manufacturing or production of goods, including materials, labor, and overhead.

Sold Goods Awaiting Shipment Inventory

Goods that have been sold but are still in the inventory because they have not yet been shipped to the buyer.

IFRS

International Financial Reporting Standards, a set of accounting standards developed by the International Accounting Standards Board that is used globally for the preparation of public company financial statements.

Inventory Holding Gains

Gains resulting from an increase in the value of inventory that a company holds over a period.