Question

Jones, Inc., a calendar-year taxpayer, is in the air conditioner repair business. The business uses the cash method. In December of the current year, Jones charged $100 of supplies at Refrigeration, Inc., (he will pay the credit card bill in January) and also purchased $600 of supplies at XYZ on open account (he will make a payment on the open account in January). What is the amount that is deductible by Jones, Inc., in the current year?A) $100B) $600C) $700D) The amounts must be capitalized and charged to expense as used.

Answer 1

Answer:

Option (A) is correct.

Explanation:

Jones, Inc. is in the air conditioner repair business

In December,

Charged for supplies at Refrigeration = $100

Purchased supplies at XYZ on open account = $600

Therefore, the amount that is deductible by Jones, Inc., in the current year is $100 because open account will not be considered for the month of December.

That's why purchased supplies of $600 from XYZ will not be deducted by the Jones, Inc.