Mike Started a Calendar Year Business on September 1ˢᵗ of This

question 72

Multiple Choice

Mike started a calendar year business on September 1ˢᵗ of this year by paying 12 months of rent on his shop at $1,000 per month. What is the maximum amount of rent that Mike can deduct this year under each type of accounting method?

• A) $12,000 under the cash method and $12,000 under the accrual method.
• B) $4,000 under the cash method and $12,000 under the accrual method.
• C) $12,000 under the cash method and $4,000 under the accrual method.
• D) $4,000 under the cash method and $4,000 under the accrual method.
• E) $4,000 under the cash method and zero under the accrual method.

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Definitions:

Legumes

A group of plants, including beans and peas, known for their ability to fix nitrogen from the atmosphere into the soil in a form that plants can use as a nutrient.

Nitrogen-Fixing Bacteria

are microorganisms capable of converting atmospheric nitrogen into a form that can be used by plants as a nutrient.

Simple Fruits

Fruits that develop from a single ovary of one flower and can be either fleshy, like cherries and tomatoes, or dry, like nuts and grains.

Seed Coat

The protective outer layer of a seed, which encases the embryonic plant and its nutrient store.