Orange Cable TV Company,an accrual basis taxpayer,allows its customers to pay by the year in advance ($350 per year),or two years in advance ($680).In September 2010,the company collected the following amounts applicable to future services: As a result of the above,Orange Cable should report as gross income:

Question

Orange Cable TV Company,an accrual basis taxpayer,allows its customers to pay by the year in advance ($350 per year),or two years in advance ($680).In September 2010,the company collected the following amounts applicable to future services:  As a result of the above,Orange Cable should report as gross income:

Quizplus · Accepted Answer

The gross income should be recognized as the services are provided to the customers. Since the customers have paid in advance for the services, the unearned revenue account would be credited and the current year's revenue account would be debited for the amounts received.

For the amounts received in September 2010, the company would recognize gross income as follows:

- $40,250 ($350 x 115 customers) for one year in advance payments
- $70,560 ($680 x 104 customers) for two years in advance payments

Total gross income recognized in 2010 would be $110,810 ($40,250 + $70,560).

The remaining amount of $9,190 ($136,000 - $110,810) would be recognized as gross income in 2011 as the services are provided to the customers.

Therefore, the correct answer is D) $111,000 in 2011.

Orange Cable TV Company,an Accrual Basis Taxpayer,allows Its Customers to Pay