On December 31, 2011, Peregrine Corporation, an Accrual Method, Calendar

question 26

Multiple Choice

On December 31, 2011, Peregrine Corporation, an accrual method, calendar year taxpayer, accrued a performance bonus of $100,000 to Charles, a cash basis, calendar year taxpayer. Charles is president and sole shareholder of the corporation. When can Peregrine deduct the bonus?

• A) In 2011, if the bonus was authorized by the Board of Directors and payment was made on or before March 15, 2012.
• B) In 2012, if payment was made at any time during that year.
• C) In 2011, if payment was made on or before March 15, 2012.
• D) In 2012, but only if payment was made on or before March 15, 2012.
• E) None of the above.

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Definitions:

FOB Destination

A shipping term indicating that the seller bears the transport costs and retains ownership until the goods reach the buyer's location.

FOB Shipping Point

A term indicating that the buyer takes ownership and responsibility for goods at the point of departure from the seller's shipping dock.

Freight-Out

Refers to the cost associated with shipping goods to customers, a part of the selling expenses in accounting.

Periodic Inventory System

An inventory system that records inventory levels and the cost of goods sold at specific intervals, rather than continuously.