Brown Thumb Landscaping is a calendar-year, accrual-method taxpayer. In September, Brown Thumb negotiated a $14,000 contract for
Question:
a. How much income from this $14,000 contract will Brown Thumb recognize in the current year? Explain.
b. How much income from this $14,000 contract will Brown Thumb recognize in the current year if it uses the cash method of accounting?
c. Suppose that the total amount to be paid under the contract with the city is estimated at $14,000 but may be adjusted to $12,000 next year during the review of the city budget. What amount from the contract, if any, should Brown Thumb recognize as income this year? Explain.
d. Suppose that in addition to the basic contract, Brown Thumb will be paid an additional $3,000 if its city landscape design wins the annual designer competition next year. Should Brown Thumb accrue $3,000 revenue this year? Why or why not?
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Related Book For
Taxation Of Individuals And Business Entities 2015
ISBN: 9780077862367
6th Edition
Authors: Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver
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