CT Computer Corporation,an accrual-basis taxpayer,sells service contracts on the computers it sells.At the beginning of January of this year,CT Corporation sold contracts with service to begin immediately:

The amount of income CT Corporation must report for this year is

Question

CT Computer Corporation,an accrual-basis taxpayer,sells service contracts on the computers it sells.At the beginning of January of this year,CT Corporation sold contracts with service to begin immediately:

The amount of income CT Corporation must report for this year is

Quizplus · Accepted Answer

C) Collections for services that do not extend beyond the next tax year may be accrued. $800 / 20 months = $40 per month. $40 × 12 months this year = $480 of the $800 accrued this year. $4,000/48 months = $83.33 per month × 12 months = $1,000. ($200 + $480 + $1,000 = $1,680) Note that the balance of the long-term contracts will be recognized in the following year as they cannot be deferred more than one tax year.

CT Computer Corporation,an Accrual-Basis Taxpayer,sells Service Contracts on the Computers