Alfred's Enterprises, an Unincorporated Entity, Pays Employee Salaries of $100,000

question 51

Essay

Alfred's Enterprises, an unincorporated entity, pays employee salaries of $100,000 during the year.At the end of the year, $12,000 of additional salaries have been earned but not paid until the beginning of the next year.
a.Determine the amount of the deduction for salaries if Alfred is a cash method taxpayer.
b.Determine the amount of the deduction for salaries if Alfred is an accrual method taxpayer.

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Definitions:

Par Value

The face value of a bond or stock, as stated by the issuing company, which might not reflect its market value.

Callable

A feature of a financial instrument that allows the issuer to repurchase or redeem the instrument before its maturity date.

Yield To Call

The total return anticipated on a bond if it is held until the date it is called by the issuer, including interest payments and the call price.

Call Price

The price at which a bond or other financial security can be repurchased by the issuer before its maturity date, as specified in the callable feature.