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

question 29

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:

Fine Assessed

A penalty charge imposed by a legal authority or governmental agency for violations of regulations or laws.

Communications Network

A system of interconnected devices and channels used to transmit or receive information between different locations.

Willingness to Pay

The maximum amount an individual or entity is prepared to pay for a good or service, reflecting the value they place on it.

Proportional

A relationship between two quantities where they increase or decrease at the same rate.