40 per month a two year membership costs 720 72024 30

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$40 per month); a two-year membership costs $720 ($720/24 = $30 per month). Cash payment for the full amount of the contract is required at the beginning of the membership period. On July 1, 2019, the company sold a one-year membership and a two-year membership. For book purposes, the corporation reports the payments for months after the end of each calendar year as unearned income. Assuming the
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transactions are treated for income tax purposes as advanced payments for services, the company should report as gross income from the two contracts: a. $1,200 in 2019. b. $420 in 2019. c. $780 in 2020. d. $600 in 2020. e. b and c are both correct. 3. Teal company is an accrual basis taxpayer. On December 1, 2019, a customer paid Teal for an inventory item that was on hand, but the customer wanted the item delivered in early January of 2020. Teal delivered the item on January 4, 2020. Teal included the sale in its 2020 income for financial accounting purposes. For tax purposes: a. Teal must recognize the income in 2019. b. Teal must recognize the income in the year title to the goods passed to the customer, as determined under the laws of the state in which the store is located. c. Teal can elect to recognize the income from this prepayment in either 2019 or 2020. d. Teal must recognize the income in 2020. e. Teal must recognize the income in the same year as it does for financial accounting purposes.
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  • Fall '19
  • Payment, Generally Accepted Accounting Principles, a. Teal

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