Laine Services,a calendar year taxpayer,billed a client for $8,450 of services on November 30,2017,and received a check in full payment from the client on January 12,2018.If Poole is an accrual basis taxpayer,it reports $8,450 taxable income in 2017.

Question

Quizplus · Accepted Answer

According to the accrual basis of accounting, revenue should be recognized when it is earned, not when it is received. Therefore, Laine Services should recognize the $8,450 of services as revenue in 2017, even though it was not received until 2018.

Laine Services,a Calendar Year Taxpayer,billed a Client for $8,450 of Services