Mike Operates a Fishing Outfitter as an Accrual-Method Sole Proprietorship

question 105

Essay

Mike operates a fishing outfitter as an accrual-method sole proprietorship. On March 1^st of this year, Mike received $20,700 for five outfitting trips. This is the first time Mike agreed to such a payment and he is obligated to outfit one trip per year for the next five summers, beginning this year. How much income must Mike recognize in each of the next five years if he is attempting to minimize his tax burden?

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Definitions:

Accounting Equation

The fundamental principle of double-entry bookkeeping showing that assets are financed by liabilities and shareholders' equity, expressed as Assets = Liabilities + Equity.

Recording

The act of entering financial transactions into accounting records such as journals or ledgers.

Relevant

Information or data that is applicable to the current situation and is useful for decision-making purposes.