Randall Company Uses the Calendar Year and the Cash Method

question 111

Essay

Randall Company uses the calendar year and the cash method of accounting. On December 31, 2013, Randall made the following cash payments. To what extent can Randall deduct the payments in 2013?
a. $50,000 for a two-year warehouse lease beginning on March 1, 2014.
b. $95,000 of inventory items held for sale to customers.
c. $1,800 to purchase a new refrigerator for the employees' lounge. The refrigerator was delivered on February 1, 2014.
d. $5,000 compensation to a consultant who spent two weeks in January 2014 analyzing Randall's payroll system.
e. $22,000 property tax to the local government for the first six months of 2014.

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Definitions:

Executive Compensation

The pay package provided to top-level management, including salary, bonuses, stock options, and other financial benefits, often reflective of the executive's role and performance.

Legitimate Authority

A form of power recognized as rightful or justified within a given social structure or organization.

Strategic Objectives

Long-term goals set by an organization that align with its vision and mission, aimed at achieving competitive advantages.

Project Objectives

Specific goals that are established to guide the completion of a project, defining what needs to be achieved for success.