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 $500 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 $2,000 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