Speak Corporation,a Calendar-Year,cash-Basis Taxpayer,sells Packages of Foreign Language Lessons to Individuals

question 33

Multiple Choice

Speak Corporation,a calendar-year,cash-basis taxpayer,sells packages of foreign language lessons to individuals planning to work overseas.In December 2019,it sold and received payment for $600,000 of 24-month lesson packages to be provided evenly through 2020 and 2021.Speak Corporation will recognize the $600,000 of income

• A)all in 2019.
• B)half in 2020 and half in 2021.
• C)all in 2020.
• D)all in 2021.

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Definitions:

Salvage Value

The estimated residual value of an asset at the end of its useful life, which can be recovered through disposal or sale.

Pretax Return

Pretax Return refers to the earnings of a company before the deduction of taxes, often used to analyze profitability from core operations.

Net Present Value

A method used in capital budgeting to assess the profitability of an investment, calculating the difference between the present value of cash inflows and outflows.

Additional Working Capital

Refers to the extra funds a business requires for its day-to-day operations, beyond its current operational needs.