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

question 128

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 1,2013; 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 2013 and 2014?

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Definitions:

Share of the Profits

This term refers to the portion of a company's profits allocated to its shareholders or partners, indicating their financial gain from the business's success.

Closing Entry

Journal entries made at the end of an accounting period to transfer temporary account balances to permanent accounts.

Capital Balances

The amount of owners' equity or shareholders' equity in a business, reflecting the residual assets after deducting liabilities.