Colby Motors Uses the Accrual Method and Reports on a Calendar

question 35

Essay

Colby Motors uses the accrual method and reports on a calendar year. In December of last year, Colby acquired auto repair equipment. As part of the acquisition, Colby purchased a warranty agreement that requires the seller of the equipment to provide repairs on the equipment for three years. Colby paid the cost of the warranty, $15,000, in January of this year. What can Colby deduct for the cost of the warranty on the tax return for last year?

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Definitions:

Client-Centred Therapy

A form of psychotherapy developed by Carl Rogers that emphasizes providing a supportive environment where clients can enhance their self-understanding.

Client-Centred Therapy

A counseling approach developed by Carl Rogers that focuses on the individual's subjective view of the world, emphasizing unconditional positive regard, empathy, and congruence in the therapeutic relationship.

Major Role

A primary or essential function, position, or part played by something or someone in a particular context or system.

Repressed Childhood Conflicts

Traumatic or anxiety-inducing experiences from one's childhood that are unconsciously blocked from conscious memory.