Randall Company Uses the Calendar Year and the Cash Method

question 18

Essay

Randall Company uses the calendar year and the cash method of accounting. On December 31, 2015, Randall made the following cash payments. To what extent can Randall deduct the payments in 2015?
a. $50,000 for a two-year warehouse lease beginning on March 1, 2016.
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, 2016.
d. $5,000 compensation to a consultant who spent two weeks in January 2016 analyzing Randall's payroll system.
e. $22,000 property tax to the local government for the first six months of 2016.

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Definitions:

Hourly Wage

The amount of money paid for each hour of work.

Nonexempt Employees

Workers who are entitled to receive overtime pay under the Fair Labor Standards Act (FLSA) for hours worked beyond the standard workweek.

FLSA Act

The FLSA Act, or Fair Labor Standards Act, is US legislation designed to protect workers against poor wages and excessive working hours, establishing minimum wage, overtime pay eligibility, and child labor standards.

Employee Handbook

Written rules and regulations informing employees of their rights and responsibilities in the employment relationship.