The accrual method
I.is permitted for the advance receipt of rent income.
II.is never permitted under the deferral method.
III.is permitted for the advance receipt of payments for goods to be delivered within the next tax year if the payment is less than the cost of goods sold and the payment is deferred for financial accounting purposes.
IV.is permitted for the advance receipt of interest income.

A)Only statement I is correct.
B)Only statement III is correct.
C)Only statements I and II are correct.
D)Only statements II and III are correct.
E)Only statements II, III, and IV are correct.

Question

The accrual method
I.is permitted for the advance receipt of rent income.
II.is never permitted under the deferral method.
III.is permitted for the advance receipt of payments for goods to be delivered within the next tax year if the payment is less than the cost of goods sold and the payment is deferred for financial accounting purposes.
IV.is permitted for the advance receipt of interest income.
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A)Only statement I is correct.
B)Only statement III is correct.
C)Only statements I and II are correct.
D)Only statements II and III are correct.
E)Only statements II, III, and IV are correct.

Quizplus · Accepted Answer

Statement I is incorrect as advance rent income is usually recognized under the deferral method. Statement II is incorrect as accrual method can be used under certain circumstances even with the deferral method. Statement III is correct as long as it meets the conditions stated. Statement IV is not necessarily correct as the advance receipt of interest income may not meet the conditions for recognition under the accrual method.

The Accrual Method I.is Permitted for the Advance Receipt of Rent Income