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

question 14

Multiple Choice

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

• A)The treatment of unearned income is the same for tax and financial accounting for both cash and accrual basis taxpayers.
• B)A cash basis taxpayer must report all of the income in the year received.
• 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 within three years 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 these.

---

Definitions:

Derivative Security

A derivative security is a financial instrument whose value is based on the performance of underlying assets, indexes, or other financial instruments.

Financial Asset

A financial asset refers to any asset that is cash, a contractual right to receive cash or another financial asset from another entity, or a contractual right to exchange financial instruments with another entity under conditions that are potentially favorable.

Claim

A demand for something as due, often referring to a right to payment or other benefits.

Interest Rate Collar

A financial derivative strategy used to hedge interest rate movements by setting upper and lower limits on interest payments.