Home Office, Inc., an accrual basis taxpayer, leases a copying machine to a new customer on

December $27,$ Year $1.$ The machine was to rent for $$1000$ per month for a period of $36$ months

beginning January $1,$ Year $2.$ The customer was required to prepay $6$ months rent at the time

the lease was signed on December $27,$ Year $1.$ The customer was also required to pay a $$5,000$

damage deposit at the time the lease was signed. The damage deposit will be returned to the

taxpayer at the end of the lease if no damage occurs.

Determine the amount of gross income Home Office recognizes in Year $1.$

$3000$

$5000$

$6000$

$12000$