Due to a Shortage of Cash, East Coast Entertainment Company

question 69

Multiple Choice

Due to a shortage of cash, East Coast Entertainment Company, an accrual basis taxpayer, could not pay its November 2018 utility bill on time. In February of 2019, East Coast Entertainment pays the utility bill.
I.East Coast can deduct the expense on either its 2018 or 2019 tax return.
II.East Coast cannot deduct the utility expense in 2018 because it is paid in 2019.
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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:

Endoderm

The innermost layer of cells or tissue of an embryo in early development that gives rise to the lining of the digestive and respiratory systems.

Embryonic Stage

A critical phase in prenatal development that occurs from about the 2nd to the 8th week after fertilization, during which major organs and structures begin to develop.

Germinal Stage

The first—and shortest—stage of the prenatal period, which takes place during the first two weeks following conception.

Fetal Stage

The final stage of prenatal development starting from the ninth week of pregnancy until birth, where significant growth and maturation of the fetus occur.