Bigtown Advertising Agency,a calendar-year,accrual basis taxpayer,was paid $60,000 for a three-year advertising contract on July 1,2013,and $36,000 for a 12-month contract on December 1,2013 How much income must Bigtown recognize for these contracts in years 2013 and 2014,respectively?

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The three-year contract is a multi-period contract, so the income must be recognized over the three years. The 12-month contract is a one-year contract, so the income must be recognized in the year it is received.For the three-year contract, the income is $60,000 / 3 = $20,000 per year. For the 12-month contract, the income is $36,000.Therefore, the income that Bigtown must recognize in 2013 is $20,000 + $36,000 = $56,000. The income that Bigtown must recognize in 2014 is $20,000.

Bigtown Advertising Agency,a Calendar-Year,accrual Basis Taxpayer,was Paid $60,000 for a Three-Year