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59.Award: 10.00 pointsColbert operates a catering service on the accrual method. In November of year 1 Colbert receiveda payment of $9,000 for 18 months of catering services to be rendered from December 1stof year 1through May 31styear 3. When must Colbert recognize the income if his accounting methods areselected to minimize income recognition?$500 is recognized in year 1, $6,000 in year 2, and $2,500 in year 3.$500 is recognized in year 1 and $8,500 in year 2.$9,000 is recognized in year 3.$2,500 is recognized in year 1 and $6,500 in year 2.$9,000 is recognized in year 1.Prepayments for services can be deferred for one year if the payments are also unearned forfinancial reporting purposes. ($9,000 ÷ 18) × 1 Month = $500)
ReferencesMultiple ChoiceDiﬃculty: 2 MediumLearning Objective: 01-05 Apply cash andaccrual methods to determine businessincome and expense deductions.
60.Award: 10.00 pointsWhich of the following types of transactions may not typically be accounted for using the cashmethod for small proprietorships?
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Generally Accepted Accounting Principles, Colbert, accrual methods, expense deductions