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

question 18

Multiple Choice

Mike started a calendar year business on September 1ˢᵗ of this year by paying 12 months 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:

Refrigerant Container

A special container designed to hold refrigerant, a substance used in air conditioning systems to absorb and release heat, under pressure.

Ozone

Triatomic oxygen (O3); an oxygen molecule consisting of three bonded oxygen atoms. The ozone layer in the Earth’s stratosphere helps protect the atmosphere from harmful solar ultraviolet radiation.

CFCs

Chlorofluorocarbons, a class of chemicals used in refrigerants and aerosol propellants, known to contribute to ozone layer depletion.

Upper Atmosphere

The region of Earth's atmosphere that is above the troposphere, including the stratosphere, mesosphere, thermosphere, and exosphere.