In Which of the Following Circumstances Would a Cash Basis

question 122

Multiple Choice

In which of the following circumstances would a cash basis taxpayer be required to account for an item of income or deduction under the accrual method of accounting?

• A)Alice receives advance payment for services that she will perform and complete by the end of the following tax year.
• B)Ben paid his business property taxes at year-end even though they were not due until the end of January.
• C)Cheryl received six months of pre-paid rent on her rental property just before the end of the year.
• D)Donald prepaid a one-year service contract on his copy machine just before year-end.
• E)A cash basis taxpayer will not be required to use the accrual basis method of accounting in any of the above circumstances.

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Definitions:

Cognitive Dissonance

The psychological discomfort experienced when holding two or more conflicting beliefs, values, or attitudes, leading to changes in belief or behavior to reduce the discomfort.

Elliot Aronson

An influential psychologist known for his research on social influence, group dynamics, and the theory of cognitive dissonance.

Theory of Planned Behavior

A psychological theory that links one's beliefs and attitudes towards behaviors to their actual behavioral intentions and actions.

Theory of Reasoned Action

A theory that suggests individuals' behavioral intentions are shaped by their attitudes toward the behavior and subjective norms surrounding it.