With Respect to the Prepaid Income from Services, Which of the Following

question 106

Multiple Choice

With respect to the prepaid income from services, which of the following is true?

• A)The treatment of prepaid income is the same for tax and financial accounting.
• B)A cash basis taxpayer can spread the income over the period services are to be provided if all of the services will be completed by the end of the tax year following the year of receipt.
• C)An accrual basis taxpayer can spread the income over the period services are to be provided if all of the services will be completed by the end of the tax year following the year of receipt.
• D)An accrual basis taxpayer can spread the income over the period services are to be provided on a contract for three years or less.
• E)None of the above.

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Definitions:

Retained Earnings

The portion of a company's profits that is held or retained and not paid out as dividends to shareholders.

Shareholder Wealth

The overall value for shareholders; it is often measured by the share price of a company multiplied by the number of shares outstanding.

Stock Accounts

Investment accounts that hold shares of various companies, allowing investors to own a part of these entities and possibly earn dividends or benefit from stock price appreciation.

Stock Split

A corporate action that increases the number of shares in a company through the division of its existing shares.