Bart Owns 100% of the Stock of Octo Corporation,which Uses

question 95

Multiple Choice

Bart owns 100% of the stock of Octo Corporation,which uses the accrual method.Bart's sister Samantha,a cash method taxpayer,did some advertising work for Octo in November 2019.In December,Octo received a billing statement from Samantha for $5,000 and paid Samantha the $5,000 in January 2020.Samantha is a calendar-year taxpayer.When may Octo deduct the $5,000?

• A)2019
• B)2020
• C)Either 2019 or 2020
• D)The expense is not deductible since Samantha is Bart's sister.

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Definitions:

Petty Cash Fund

A small amount of cash kept on hand by a business for making immediate payments for miscellaneous small expenses.

Journal Entries

The basic means of recording financial transactions in the accounting records, consisting of debits and credits to various accounts.

Vouchers

Documents that serve as evidence of authority to make a payment and usually support transactions before they are processed.

Currency

The system of money in general use in a particular country, recognized as a medium of exchange for goods and services.