Windjammer Corporation, a cash-basis, calendar-year corporation sold $30,000 of merchandise to Jackpot Company in January, year 1.In November, Jackpot declared bankruptcy without paying Windjammer.In year 4, Jackpot had reorganized under a new owner and paid all its old debts including the $30,000 owed Windjammer.How does Windjammer treat these events?

Question

Quizplus · Accepted Answer

As a cash-basis taxpayer, Windjammer recognizes revenue when cash is received. Therefore, the $30,000 is recognized as revenue in year 4 when the payment is actually received.

Windjammer Corporation, a Cash-Basis, Calendar-Year Corporation Sold $30,000 of Merchandise