Office Palace,Inc. ,leased an all-in-one printer to a new customer,Ashley,on December 27,2015.The printer was to rent for $600 per month for a period of 36 months beginning January 1,2016.Ashley was required to pay the first and last month's rent at the time the lease was signed.Ashley was also required to pay a $1,500 damage deposit.Office Palace must recognize as income for the lease:

Question

Quizplus · Accepted Answer

If Office Palace is an accrual basis taxpayer, they must recognize income in the year of the lease agreement, which is 2015. However, they can only recognize the rental income for December 2015 since that is when the lease was signed and the first and last month's rent were received. Therefore, the income recognized in 2015 would be $600 x 1 = $600 for the month of December.