TIS SHOws what is correct the work you have completed so fer. It does not indica
ID: 2544591 • Letter: T
Question
TIS SHOws what is correct the work you have completed so fer. It does not indicate or incorrect for 18 Brillo Company uses the calendar year and the cash method of accounting. On December 29. 2017, Billo made the following cash payments. To what extent can Brillo deduct the payment in 2017? a. $69,000 for a two-year office lease beginning on February 1. 2018. b. $98,000 of inventory items held for sale to customers. c. $3.700 to purchase a new refrigerator for the employees' lounge. The refrigerator was delivered on January 8, 2018. d. $6,700 retainer to a consultant who spent three weeks in January 2018 analyzing Brillo's internal control system. e. $24,200 property tax to the local government for the first six months of 2018 nts 3 Answer is complete but not entirely correct. a Deduction b Deduction C Deduction 98,000 3,700 Deduction |s 6700 e |Deduction }S 24,2000 Type here to searchExplanation / Answer
Solution:
Brillo company cannot take the benefit of any of the cash payments listed in the question as Income Tax deduction in 2018.
a. $69,000 lease payment is related to office lease that begins in feb 2016. So the expense does not pertain to 2017 and is prepaid expense.
b. $98,000 paid for inventory held for sale to customer is held as closig stock and revenue not realized for that in 2017. So it will not be deductible in 2017.
c. $3,700 paid for new refrigerator delivered on Jan 8, 2018. So it was not capitalized in 2017 and the depreciation cannot be claimed in 2017.
d. $6,700 paid to consultant who did the service in Jan 2018. So the expense is related to 2018 and cannot beclaimed in 2017.
e. $24,200 of property tax is pertaining to first half of 2018 and cannot be claimed as expense in 2017.
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