Office Palace, Inc., leased an all-in-one printer to a new customer, Ashley, on December 27, 2012.The printer was to rent for $600 per month for a period of 36 months beginning January 1, 2013.Ashley was required to pay the first and last month's rent at the time the lease was signed.Ashley was also required to pay a $1,500 damage deposit.Office Palace must recognize as income for the lease:
A)$0 in 2012, if Office Palace is an accrual basis taxpayer.
B)$7,800 in 2013, if Office Palace is a cash basis taxpayer.
C)$2,700 in 2012, if Office Palace is a cash basis taxpayer.
D)$1,200 in 2012, if Office Palace is an accrual basis taxpayer.
E)None of the above.

Question

Quizplus · Accepted Answer

Office Palace must recognize $1,200 in 2012 as income for the lease because it is an accrual basis taxpayer and the first month's rent and the damage deposit were received in 2012.