1.Marilyn operates a day care center as a cash-method sole proprietorship. On August 1st of this year, Marilyn received a prepayment of $4,000 for child care services to be rendered evenly over the next 20 months. How much income must Marilyn recognize this year if she is attempting to minimize her tax burden?

2 .David purchased a deli shop on February 1st of last year and began to operate it as a sole proprietorship. David reports his personal taxes using the cash method over a calendar year, and he wants to use the cash method and fiscal year for his sole proprietorship. He has summarized his receipts and expenses through January 31st of this year as follows:

....... . .... ... .. Receipts . . Expenses February through December last year $ 112,000 . . $ 84,500 January this year . . . $10,400 . . $6,200

What income should David report from his sole proprietorship?