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[The following information applies to the questions displayed below.] Nancy operates a business that uses the accrual method of accounting. In December, Nancy asked her brother, Hank, to provide her business with consulting advice. Hank billed Nancy for $9,000 of consulting services in year 0 (a reasonable amount), but Nancy was only able to pay $6,000 of the bill by the end of year 0. However, Nancy paid the remainder of the bill in year 1.

a. How much of the $9,000 consulting services will Hank include in his income in year 0 if he uses the cash method of accounting? What amount can Nancy deduct in year 0 for the consulting services?

b. How much of the $9,000 consulting services will Hank include in his income in year 0 if he uses the accrual method of accounting? What amount can Nancy deduct in year 0 for the consulting services?

Amount included by Hank Amount deducted by Nancy Amount included by Hank Amount deducted by Nancy