1-Firm B uses the calendar taxable year and the cash method of accounting. On December 31, 20x6, Firm B made certain cash payments. To what extent can it deduct the payment in 20x6? (Please note: payments for assets to be consumed in the following year are fully deductible in the year of payment if the expenditure results in a benefit with a duration of 12 months or less and is consumed by the end of the following year.)
a) $3,000 compensation to a consultant who spent three weeks in January 20x7 analyzing B’s internal control system.
b) $500,000 to purchase a new piece of manufacturing equipment. The equipment was delivered on January 8, 20x7 and has a useful life of 5 years.
c) $16,900 property tax to the local government for the first six months of 20x7.
d) $50,000 for a two-year lease beginning on February 1, 20x7.
e) $23,700 of inventory items held for sale to customers.
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1-Firm B uses the calendar taxable year and the cash method of accounting. On December 31, 20x6, Fir...
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