Christy Purchases $1,000-Worth of Supplies from a Local Vendor

question 74

Multiple Choice

Christy purchases $1,000-worth of supplies from a local vendor.The supplies are delivered on March 29,2016.The supplies are fully used up by year end.Because of unusual circumstances,a bill for the supplies arrives from the vendor on January 10,2017,and is promptly paid.When can Christy deduct the expenses?
I.In 2016,if she is an accrual basis taxpayer.
II.In 2017,if she is a cash basis taxpayer.
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• A)Only statement I is correct.
• B)Only statement II is correct.
• C)Both statements are correct.
• D)Neither statement is correct.

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Definitions:

Inflation Rate

The percentage increase in the general level of prices for goods and services in an economy over a period of time.

NPV

Net Present Value; a financial calculation used to determine the value of a series of future cash flows by discounting them to the present using a specific rate.

Capital Asset Pricing Model

A model that describes the relationship between systematic risk and expected return for assets, particularly stocks.

Risk-Free Rate

The rate of return of an investment with zero risk, serving as a benchmark for evaluating other investments.