In Order to Protect Against Rent Increases on the Building

question 97

Essay

In order to protect against rent increases on the building in which she operates a dance studio,Mella signs an 18-month lease for $36,000.The lease commences on October 1,2016.How much of the $36,000 payment can she deduct in 2016 and 2017?
a.If Mella is an accrual basis taxpayer?
b.If Mella is a cash basis taxpayer?

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Definitions:

Salaries Expense

The total amount spent by an organization on employee salaries over a specific period of time.

Salaries Payable

A liability account that records the amount of salaries owed to employees but not yet paid.

Accrued

Income earned or expenses incurred before cash has been exchanged, often recognized in the accounting process.

Insurance Policy

A legal contract between an insurer and the insured, outlining the terms, coverages, premiums, and conditions under which the insurer agrees to compensate the insured.