Brandon Is the Operator and Owner of a Cleaning Service

question 95

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, 2014, the last business day of his tax year: $3,000 - Checks received from customers for services rendered during November and December 2014. The checks are deposited in his bank account on January 4, 2015. Checks received from customers for services to be rendered during 2015. The checks $4,000 - $2,400 - are received in the morning mail and deposited in his bank account on December 31, 2014. 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 2015. 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, 2015 How much of the $9,400 collected by Brandon on December 31 must be included in his 2014 gross income?

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

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Definitions:

Supplies

Supplies refer to the materials and items that are used in the daily operations of a business, office, or institution, often consumable and requiring regular replenishment.

Adjusted Trial Balance

A list of all accounts and their balances after adjusting entries have been made, used to check the equality of debits and credits and prepare financial statements.

Revenue Accounts

Accounts in financial accounting that represent the income generated by a company from its operational activities.

Expense Accounts

These are ledger accounts that track the costs incurred by a company in the course of doing business, excluding capital expenditures.