Mike Started a Calendar Year Business on September 1^st of This

question 41

Multiple Choice

Mike started a calendar year business on September 1^st of this year by paying 12 months' rent on his shop at $1,000 per month.What is the maximum amount of rent that Mike can deduct this year under each type of accounting method?

• A) $12,000 under the cash method and $12,000 under the accrual method.
• B) $4,000 under the cash method and $12,000 under the accrual method.
• C) $12,000 under the cash method and $4,000 under the accrual method.
• D) $4,000 under the cash method and $4,000 under the accrual method.
• E) $4,000 under the cash method and zero under the accrual method.

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Definitions:

Unsecured

Refers to loans or debts that are issued and supported only by the borrower's creditworthiness, rather than by any type of collateral.

Secured Bonds

Bonds backed by specific assets as collateral to ensure repayment in case of issuer default.

Specific Assets

Assets identified and designated for a particular purpose or project, often distinguished from general or unspecified assets.

Bond Indenture

A legal contract between a bond issuer and bondholders, detailing the terms of the bond such as the interest rate, maturity date, and obligations of both parties.