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?

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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