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?

Question

Quizplus · Accepted Answer

C)An accrual-basis taxpayer in receipt of prepaid income can defer payments for future services to the year following the year in which the payment is received.As of the end of the year of receipt,$720 had been earned and will be included in income ($1,200 × 6/10).