Teal company is an accrual basis taxpayer.On December 1,2011,a customer paid for an item that was on hand,but the customer wanted the item delivered in early January 2012.Teal delivered the item on January 4,2012.Teal included the sale in its 2011 income for financial accounting purposes.

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Quizplus · Accepted Answer

Teal is an accrual basis taxpayer, which means that income should be recognized when it is earned, regardless of when it is actually received. The customer paid for the item in 2011, and Teal had the item on hand, so the income was earned in 2011 and should be recognized in that year, even though delivery was not made until 2012.

Teal Company Is an Accrual Basis Taxpayer