Office Palace, Inc., leased an all-in-one printer to a new customer, Ashley, on December 27, 2019.The printer was to rent for $600 per month for a period of 36 months beginning January 1, 2020.Ashley was required to pay the first and last month's rent at the time the lease was signed.Ashley was also required to pay a $1,500 damage deposit.Office Palace must recognize as income for the lease:
A)$0 in 2019, if Office Palace is an accrual basis taxpayer.
B)$7,800 in 2020, if Office Palace is a cash basis taxpayer.
C)$2,700 in 2019, if Office Palace is a cash or accrual basis taxpayer.
D)$1,200 in 2019, if Office Palace is a cash or accrual basis taxpayer.
E)None of these.

Question

Quizplus · Accepted Answer

Office Palace must recognize $1,200 in 2019 as income for the lease. This is because the first and last month's rent, totaling $1,200, was paid in 2019. The remaining rent payments will be recognized as income in the years in which they are received.