[ANSWERED] Timing of Expense Recognition . Solutions Corporation, a computer vendor and consult – ing company,.

Timing of Expense Recognition . Solutions Corporation, a
computer vendor and consult – ing company, uses the accrual method of
accounting. Its tax year is the calendar year. The following are three of the
corporation’s transactions during the current year:
1.Solutions Corporation hired a contractor to remodel its
sales floor. The contractor completed the remodeling on November 30. On
December 15, Solutions received a $5,000 bill from the contractor. Solutions
immediately contacted the contractor to contest $1,000 of the total charges,
arguing that it exceeded the price that was agreed upon. Solutions made no
payment on the bill during its current tax year.
2. Solutions offers a 2-year warranty on all of its computer
systems. For sales of computers in the current year, it paid $11,500 to service
warranties during the current tax year, and it expects to pay $12,000 to
fulfill the remaining warranty obligations next year.
3. £very year, Solutions offers a series of six trade
seminars from November 1 through April 30. It receives all registration fees
from participants by October 1, before the seminars begin. As of December 31,
two of the six seminars are completed, and the next seminar is scheduled for
January 14-15. The expenses incurred in performing the seminars are routine
each year. On the first of each month from November through April, Solutions
pays the $625 monthly rent for the seminar location. On September 16, Solutions
signs a contract with the seminar teacher, a computers expert and excellent
public speaker. The contract requires Solutions to pay the teacher $900 after
each seminar, a total of $5,400. On October 3, Solutions signs a contract with
a local printing company, which will pro vide text materials for the seminars.
Solutions pays the printer $350 after each seminar’s materials are delivered
the day before the seminar.
Required:
a. How should Solutions Corpo ration treat these
transactions? What rules apply?
b. How would your answers change for each of the
transactions if Solutions Corpo ration were a cash-method taxpayer?