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23 May, 10:26

Mike started a calendar year business on September 1st of this year by paying 12 months of 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?

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  1. 23 May, 10:32
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    accrual method = $4000

    cash method = $12000

    Explanation:

    given data

    rent = $1000

    time = 12 month

    to find out

    maximum amount of rent

    solution

    we know from 1 September mika start paying rent

    so September to December = 4 months

    so by accrual method

    accrual method = rent * time

    accrual method = 1000 * 4

    accrual method = $4000

    and

    by cash method

    cash method = rent * time

    cash method = 1000 * 12

    cash method = $12000
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