Harold Is a 90% Owner of National Homes Construction, an Accrual

Multiple Choice

Harold is a 90% owner of National Homes Construction, an accrual basis S corporation. On December 30, 2014, National Homes accrues a $100,000 bonus to Harold, payable on February 15, 2015. I. If Harold is an accrual basis taxpayer, National Homes deducts the bonus in 2014 and Harold reports the income in 2015. II. If Harold is a cash basis taxpayer, National Homes deducts the bonus in 2014 and Harold reports the income in 2015.

A) Only statement I is correct.
B) Only statement II is correct.
C) Both statements are correct.
D) Neither statement is correct.