An Electrician Completes a Rewiring Job and Is Paid $1,000

question 84

Multiple Choice

An electrician completes a rewiring job and is paid $1,000 by the customer in November.The customer has a small fire in his house and sues the electrician for the repayment of the $1,000 fee plus damages in December.The electrician reaches a settlement with the customer in the following February and refunds the $1,000 fee.How should the electrician treat these events when he files his tax return in April?

• A)No income will be reported.
• B)The income will be reported for the year of receipt,and a tax deduction will be claimed on the tax return for the year of repayment.
• C)The income will be reported for the year of receipt,and then an amended return will be filed in the following year to claim the refund.
• D)Both the income and the deduction will be reported on the same tax return (for the year of receipt).

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Definitions:

Variable Direct Labor

The portion of labor costs that varies directly with production volume.

Desired Profit

The profit amount that a company aims to earn in a specific period, typically set as a goal in financial planning.

Markup

The amount added to the cost price of goods to cover overhead and profit.

Desired Profit

The target profit a business aims to achieve within a specific period.