Hitz Company, a Calendar Year, Accrual Basis Taxpayer, Recorded $1,735

question 34

Multiple Choice

Hitz Company, a calendar year, accrual basis taxpayer, recorded $1,735 accrued interest expense and $1,735 accrued interest payable when it closed its books on December 31. The interest relates to a loan from First State Bank and accrued over the last two months of the year. Which of the following statements is true?

• A) Hitz can't deduct the accrued interest expense until the year of payment.
• B) Hitz can deduct the accrued interest expense this year only if it pays the interest within eight and one-half months after the close of the year.
• C) Hitz can deduct the accrued interest expense this year.
• D) Hitz can never deduct the interest expense.

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Definitions:

Product B

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Advertising

The activity or profession of producing advertisements for commercial products or services.

Regular Hourly Rate

The fixed amount of money that an employee is paid for each hour of work.

Overtime

Working hours that exceed the standard work hours defined by labor laws or agreements.