In October of year 0, Janine received a $11,500 payment from a client for 25 months of security services she will provide starting on September 1 of year 0. This amounts to $460 per month. Janine is a calendar-year taxpayer.

c. Suppose that instead of services, Janine received the payment for a security system (inventory) that she will deliver and install in year 2. When would Janine recognize the income from the advance payment for the inventory sale if she uses the accrual method of accounting and she elects to use the deferral method for reporting income from advance payments? For financial accounting purposes, she reports the income when the inventory is delivered.

a. Year 0 and year 1

b. Year 1

c. Year 2

d. Year 1 and year 2

e. Year 0