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

According to accrual basis accounting, revenue is recognized when it is earned, regardless of when payment is received. In this case, CT Corporation sold contracts with services to begin immediately at the beginning of January. Therefore, CT Corporation has earned $280 in revenue ($80 * 11 contracts) in January and must report it as income for the year. Hence, the correct answer is C.

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