Randall Company Uses the Calendar Year and the Cash Method

question 69

Essay

Randall Company uses the calendar year and the cash method of accounting. On December 31, 2020, Randall made the following cash payments. To what extent can Randall deduct the payments in 2020?$50,000 for a two-year warehouse lease beginning on March 1, 2021.$95,000 of inventory items held for sale to customers.$1,800 to purchase a new refrigerator for the employees' lounge. The refrigerator was delivered on February 1, 2021.$5,000 compensation to a consultant who spent two weeks in January 2021 analyzing Randall's payroll system.$22,000 property tax to the local government for the first six months of 2021.

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Definitions:

Intra-entity Gross Profit

Profits resulting from transactions within or between entities under common control, not recognized in consolidated financial statements until realized externally.

Consolidation Reporting

The financial reporting process that aggregates the results of multiple entities within a single set of statements, reflective of a group as a single economic entity.

Noncontrolling Interest

An ownership interest in a corporation where the stake does not offer majority voting rights, and the interest lies in the shares of subsidiaries not wholly owned by the parent.

Intra-entity Asset Transfers

Transactions involving the transfer of assets between divisions or units within the same entity.