Colbert Operates a Catering Service on the Accrual Method

question 113

Multiple Choice

Colbert operates a catering service on the accrual method. In November of year 1, Colbert received a payment of $9,000 for 18 months of catering services to be rendered from December 1 ^st of year 1 through May 31 ^stof year 3. When must Colbert recognize the income if his accounting methods are selected to minimize income recognition?

• A)$500 is recognized in year 1, $6,000 in year 2, and $2,500 in year 3.
• B)$500 is recognized in year 1 and $8,500 in year 2.
• C)$9,000 is recognized in year 3.
• D)$2,500 is recognized in year 1 and $6,500 in year 2.
• E)$9,000 is recognized in year 1.

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Definitions:

Autoworkers

Employees in the automotive industry who are involved in the design, development, manufacturing, marketing, and selling of motor vehicles.

Automobiles

Motor vehicles with four wheels designed primarily for passenger transportation on roads.

Supply

The total quantity of a good or service that businesses are willing and able to sell at a given price level.

Product

Any item or service that is created through a process and is offered for sale to consumers.