With respect to income from services, which of the following is true?
A)An accrual basis taxpayer will always recognize the income over the period the services will be rendered.
B)A cash basis taxpayer can spread the income from a 24-month service contract over the contract period.
C)If an accrual basis taxpayer sells a 36-month service contract on July 1, 2019 for $3,600, the taxpayer's 2019 gross income from the contract is $600.
D)If an accrual basis taxpayer sells a 24-month service contract on July 1, 2019, one-half (12/24) the income is recognized in 2020.
E)None of these.

Question

Quizplus · Accepted Answer

An accrual basis taxpayer recognizes income when it is earned, regardless of when payment is received. In the case of a 36-month service contract sold for $3,600 starting on July 1, 2019, six months of the service fall within 2019. Therefore, the income recognized in 2019 would be 6/36 of the total contract value, which is $600.

With Respect to Income from Services, Which of the Following