Green operates a business that provides accounting services to his clients. He uses the accrual basis to report income and deductions for tax purposes. The following information is available concerning his business for 2020:

1.He received a $3,000, 4-month, 12% note on December 1, 2020 for services rendered during 2020.

2.He received an $2,000, 6-month, noninterest note on September 1, 2019 for services rendered during 2019. The note was received at a 9% discount. He collected the note on March 1, 2020.

3.He issued a $1,800, 8-month, noninterest-bearing note for an expense item on June 1, 2020. The note was issued at an 8% discount.

4.He issued a $15,000, 9-month, 10% note for an expense item on August 1, 2019. He paid the note on May 1, 2020.

5.He sold a 20-month service contract to a client on December 1, 2020 in the amount of $6,400. He elected to use the deferral method for income recognition purposes.

Required:

1. Determine the amount of the net profit from Green's business for 2020.

2. Determine the amount of income to be recognized during 2020 for the service contract in #5.