Little Corporation Uses the Accrual Method of Accounting

question 97

Essay

Little Corporation uses the accrual method of accounting. Little's sole shareholder, Renee, uses the cash method of accounting. Both taxpayers use the calendar year as their tax year. The corporation accrues a $25,000 interest payment to Renee on December 25, 2011 and makes the payment on March 10, 2012. What are the tax consequences of the transactions to both taxpayers in 2011 and 2012?

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Definitions:

Ointment

A smooth, thick substance applied to the skin for a therapeutic reason or to protect, moisturize, or heal.

Right Documentation

Accurate and thorough documentation that is essential in healthcare and other fields to ensure information is correctly recorded and communicated.

Seven Rights

A guideline in the medical field ensuring the correct drug, dose, patient, route, time, reason, and documentation are followed during medication administration.

Prescription

An authorization given by a licensed healthcare professional that allows a patient to be provided with a medicine or treatment.