An Exception to the Economic Performance Test Allows the Deduction

question 20

Multiple Choice

An exception to the economic performance test allows the deduction of year-end accruals if
I.Either the expense is not material for both tax and financial purposes or the accrual results in a better matching of revenue and expenses.
II.The taxpayer consistently treats the item as incurred in the year the all events test is met.
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• A)Only statement I is correct.
• B)Only statement II is correct.
• C)Both statements are correct.
• D)Neither statement is correct.

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Definitions:

Epinephrine

A hormone and neurotransmitter also known as adrenaline, secreted by the adrenal glands, that increases heart rate, contracts blood vessels, dilates air passages, and participates in the fight-or-flight response.

ADH

Antidiuretic Hormone, a peptide hormone that plays a crucial role in regulating water balance in the body by increasing water reabsorption in the kidneys.

Physiological Processes

Functions and activities occurring in living organisms that contribute to growth, metabolism, and reproduction.

Hormones

Chemical substances produced in the body that regulate and control the activity of certain cells or organs.