In Late June 2019, Art Is Audited by the State

question 190

Essay

In late June 2019, Art is audited by the state and a large deficiency is assessed. In November of the same year, his
Federal income tax return is audited by the IRS. What has probably happened?

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Definitions:

Liabilities

Liabilities are financial obligations or debts that a company owes to others, including loans, accounts payable, mortgages, and other forms of owed money.

Installment Note

A debt instrument that requires regular payments of principal and interest over a set period.

Fiscal Year

A 12-month cycle utilized by corporations and governmental bodies for the purposes of financial statements and budget planning, not always coinciding with the January to December calendar year.

Principal Repayment

The process of paying back the original amount of money borrowed, excluding interest or other charges.