CT Computer Corporation, an Accrual Basis Taxpayer, Sells Service Contracts

question 43

Multiple Choice

CT Computer Corporation, an accrual basis taxpayer, sells service contracts on the computers it sells. At the beginning of January of this year, CT Corporation sold contracts with service to begin immediately: The amount of income CT Corporation must report for this year is

• A) $200.
• B) $1,000.
• C) $1,680.
• D) $5,000.

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Definitions:

Actual Cost

Actual Cost is the total amount of money that has been spent on a project or investment, including all direct and indirect expenses.

Company Stock

Equity shares issued by a corporation representing ownership in the company.

Incremental Value

The additional value created by undertaking a particular action, project, or investment compared to not doing so.

Actual Cost

The real, total expenditure incurred in acquiring an asset, completing a project, or executing a transaction, including all relevant expenses.