Mike Started a Calendar-Year Business on September 1 ^st of This

question 90

Multiple Choice

Mike started a calendar-year business on September 1 ^st of this year by paying 12 monthsof rent on his shop at $1,000 per month. What is the maximum amount of rent that Mike can deduct this year under each type of accounting method?

• A)$12,000 under the cash method and $12,000 under the accrual method
• B)$4,000 under the cash method and $12,000 under the accrual method
• C)$12,000 under the cash method and $4,000 under the accrual method
• D)$4,000 under the cash method and $4,000 under the accrual method
• E)$4,000 under the cash method and zero under the accrual method

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Definitions:

Consolidated Statement

Financial statements that combine the accounting information of a parent company with its subsidiaries, presenting it as a single economic entity.

Sales

The revenue generated from the sale of goods or services by a company during a specific period.

Stock Warrants

Stock Warrants are derivatives that grant the holder the right to buy a company's stock at a specific price before the expiration date.

Consolidated Earnings

The aggregate amount of net income earned by a parent company and its subsidiaries, reported as a single figure in the parent's financial statements.