Jim Operates His Business on the Accrual Method, and This

question 110

Multiple Choice

Jim operates his business on the accrual method, and this year, he received $4,000 for services that he intends to provide to his clients next year. Under what circumstances can Jim defer the recognition of the $4,000 of income until next year?

• A)Jim can defer the recognition of the income if he absolutely promises not to provide the services until next year.
• B)Jim must defer the recognition of the income until the income is earned.
• C)Jim can defer the recognition of the income if he has requested that the client not pay for the services until the services are provided.
• D)Jim can elect to defer the recognition of the income if the income is not recognized for financial accounting purposes.
• E)Jim can never defer the recognition of the prepayments of income.

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Definitions:

Perfect Information

A state in which all participants in an economic market have complete and instantaneous knowledge of all market aspects that affect their transactions.

Expected Opportunity Loss

The potential loss in value for not choosing the best course of action in decision-making under uncertainty.

Perfect Information

An ideal state in decision-making processes where all parties have complete and accurate information.

Expected Payoff

The average amount one can expect to win or lose per bet or decision, calculated by weighing each possible outcome by its probability of occurring.