In July of This Year, Sam Performs Financial Consulting Services

question 10

Multiple Choice

In July of this year, Sam performs financial consulting services for William. On August 1, Sam sends William a bill for $1,200. As of September 30, Sam had not heard from William. After repeated efforts to collect the fee, Sam discovers in November that William has left the state and cannot be found. If Sam is an accrual basis taxpayer, for the current year he can deduct

• A)$- 0 -
• B)A $800 ordinary loss
• C)A $1,200 ordinary loss
• D)A $1,200 short-term capital loss
• E)A $1,200 long-term capital loss

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Definitions:

Purchase Order

A formal document sent by a buyer to a seller with the intent to purchase products or services under specified terms.

Peak Demand

The highest point of consumer demand for a product or service within a particular period, often leading to strain on resources or increased costs.

Absorption Costing

A costing method where all manufacturing costs, both fixed and variable, are assigned to units of production and are absorbed by those units.

Variable Costing

An accounting method that includes only variable production costs—such as materials, labor, and overhead—in the cost of goods sold, while fixed costs are expensed in the period they are incurred.