Teal company is an accrual basis taxpayer.On December 1,2015,a customer paid for an item that was on hand,but the customer wanted the item delivered in early January 2016.Teal delivered the item on January 4,2016.Teal included the sale in its 2015 income for financial accounting purposes.

Question

Quizplus · Accepted Answer

As an accrual basis taxpayer, Teal must recognize income when it is earned, regardless of when payment is received. In this case, the sale was made in 2015 when the customer paid for the item, even though the delivery occurred in 2016. Therefore, Teal must recognize the income in 2015.

Teal Company Is an Accrual Basis Taxpayer