The Maroon & Orange Gym,Inc. ,uses the accrual method of accounting.The corporation sells memberships that entitle the member to use the facilities at any time.A one-year membership costs $480 ($480/12 = $40 per month);a two-year membership costs $720 ($720/24 = $30 per month).Cash payment is required at the beginning of the membership period.On July 1,2014,the company sold a one-year membership and a two-year membership.The company should report as gross income from the two contracts:

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The accrual basis taxpayer can prorate the income from services in the first year,but must include the balance of the income on the contract in the following year.Therefore,for the 24-month contract,all of the income was reported by the end of the second tax year.This limited deferral is provided under Revenue Procedure 2004-34.($40 x 6 + ($720-$180)= $780. )