Final answer:
Bonuses paid to key employees in December are recognized as an expense in the year-end financial statements (C), following the accrual basis of accounting which matches expenses with the revenues they help to generate within the same fiscal year. The correct answer is option C).
Step-by-step explanation:
When an interim period is treated as an integral portion of an entire year, bonuses paid to key employees in December are recognized as an expense in the year-end financial statements (C). According to the accrual basis of accounting, expenses should be matched with the revenues they help to generate. Therefore, if the bonuses are for performance within the year, they should be expensed within the same fiscal year that the performance occurs, even if the actual payment is made in December.