Brandon Is the Operator and Owner of a Cleaning Service

question 97

Multiple Choice

Brandon is the operator and owner of a cleaning service who uses the cash method of accounting.He receives the following payments on December 31,2013,the last business day of his tax year:
$3,000 -Checks received from customers for services rendered during November and December 2013.The checks are deposited in his bank account on January 4,2014.
$4,000 -Checks received from customers for services to be rendered during 2014.The checks are received in the morning mail and deposited in his bank account on December 31,2013.
$2,400 -A check received from a customer for a service contract.The services under the contract are to be rendered over 24 months,beginning in January 2014.The customer met Brandon at a New Year's Eve party and gives Brandon the check at 11:30 p.m.The check is deposited in his bank account on January 4,2014
How much of the $9,400 collected by Brandon on December 31 must be included in his 2013 gross income?

• A)$ 2,400
• B)$ 3,000
• C)$ 5,400
• D)$ 7,000
• E)$ 9,400

---

Definitions:

Statement of Financial Position

A financial statement detailing a company's assets, liabilities, and shareholders' equity at a specific point in time, providing a snapshot of its financial health.

Shareholders' Equity

The residual interest in the assets of a corporation that remains after deducting its liabilities, representing ownership interest.

Cash Flow to Stockholders

The amount of cash that a company returns to its shareholders, typically in the form of dividends.

Cash Flow to Stockholders

The amount of cash a company pays out to its shareholders, typically in the form of dividends.