Gabe Corporation,an Accrual-Basis Taxpayer That Uses the Calendar Year as Its

question 81

Essay

Gabe Corporation,an accrual-basis taxpayer that uses the calendar year as its tax year,sells CPE (continuing professional education)courses under contracts ranging from three months to two years.Assume that Gabe Corporation sold three contracts on July 1,2017; one for six months costing $300; one for one year costing $500; and one for two years costing $800.
Required: What is the minimum amount of income that must be recognized in 2017 and 2018?

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Definitions:

Output Quota

A limit set, usually by a governing body, on the amount of a product that can be produced or sold within a certain period.

Oligopoly

A market structure dominated by a small number of large firms, leading to limited competition and often higher prices.

Collusive Control

Practices whereby firms in the same industry conspire to control market competition, often through price fixing, market allocations, or production quotas, in violation of antitrust laws.

Collusive Control

A situation where firms in a market agree to set prices or output levels to maximize their collective profits, often at the expense of fair competition.