Hitz Company, a Calendar Year, Accrual Basis Taxpayer, Recorded $1,735

question 34

Multiple Choice

Hitz Company, a calendar year, accrual basis taxpayer, recorded $1,735 accrued interest expense and $1,735 accrued interest payable when it closed its books on December 31. The interest relates to a loan from First State Bank and accrued over the last two months of the year. Which of the following statements is true?

• A) Hitz can't deduct the accrued interest expense until the year of payment.
• B) Hitz can deduct the accrued interest expense this year only if it pays the interest within eight and one-half months after the close of the year.
• C) Hitz can deduct the accrued interest expense this year.
• D) Hitz can never deduct the interest expense.