Karen, an Accrual Basis Taxpayer, Sold Goods in December 2017

question 16

Multiple Choice

Karen, an accrual basis taxpayer, sold goods in December 2017 for $20,000. The customer was unable to pay cash. So the customer gave Karen a note for $20,000 that was payable in April 2018. The note bore interest at the Federal rate. The fair market value of the note at the end of 2017 was $18,000. Karen collected $20,500 from the customer in April 2018, $20,000 principal plus $500 interest. Under the accrual method, Karen must recognize income of:

• A)$20,500 in 2018.
• B)$18,000 in 2017 and $2,500 in 2018.
• C)$20,000 in 2017 and $500 in 2018.
• D)None of the above.

---

Definitions:

Revenue Centre Manager

An individual responsible for generating revenue within a particular segment or area of a business, focusing on sales and marketing efforts.

Goal Congruence

The alignment of individual objectives and organizational goals to ensure that all efforts contribute to the overall success.

Decision Making

The cognitive process of selecting a course of action from among multiple alternatives, often involving aspects of psychology, economics, and management.

Planning and Control

Planning and Control encompass the processes used by management to set goals, implement strategies, and ensure the organization's resources are used effectively and efficiently to achieve them.