Murphy Uses the Accrual Method and Reports on a Calendar

question 106

Essay

Murphy uses the accrual method and reports on a calendar year. This year, Murphy signed a binding contract to provide consulting services to Kirby beginning next year. Murphy incurred $15,000 to train his staff for this particular project. In addition, Murphy estimates that he will incur another $60,000 to complete the Kirby contract. What amount, if any, can Murphy deduct this year for the services expected to be rendered next year?

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Definitions:

Aortic

Relating to the aorta, the largest artery in the body, which carries oxygenated blood from the heart to the rest of the body.

Cusps

Pointed or rounded projections on the chewing surface of teeth, or flap-like structures in the heart valves.

AV Valve

Short for atrioventricular valve, it relates to the valves between the atria and ventricles of the heart that prevent backflow of blood.

Pulmonary Semilunar Valve

A heart valve that is a semilunar valve. It is situated between the right ventricle and the pulmonary trunk.