During 2014,the First Year of Operations,Silver,Inc

question 43

Multiple Choice

During 2014,the first year of operations,Silver,Inc. ,pays salaries of $175,000.At the end of the year,employees have earned salaries of $20,000,which are not paid by Silver until early in 2015.What is the amount of the deduction for salary expense?

• A)If Silver uses the cash method,$175,000 in 2014 and $0 in 2015.
• B)If Silver uses the cash method,$0 in 2014 and $195,000 in 2015.
• C)If Silver uses the accrual method,$175,000 in 2014 and $20,000 in 2015.
• D)If Silver uses the accrual method,$195,000 in 2014 and $0 in 2015.
• E)None of the above is correct.

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Definitions:

Debt

Money that is owed or due to another individual or entity.

Market Value

The going rate for buying or selling a service or asset.

March Put

A put option contract with a expiration date in March, allowing the holder to sell an asset at a pre-specified price.

Call Option

A financial contract giving the buyer the right, but not the obligation, to purchase a stock, commodity, or other asset at a specified price within a specified time.