Norah's Music Lessons Inc. is a calendar- year taxpayer using the accrual method of accounting. On October 1 of this year, the corporation received $1,200 for a one- year contract beginning on that date to provide 10 lessons. The company provided 6 lessons this year under the contract. How much should the corporation include in income this year with respect to this contract?

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Quizplus · Accepted Answer

Under the accrual method, income is recognized when earned. Norah's Music Lessons provided 6 out of 10 lessons this year, so they earned 6/10 of the $1,200 contract, which is $720.