Chicago Cleaning Services Provides Nightly Janitorial Services at a Monthly

question 28

Multiple Choice

Chicago Cleaning Services provides nightly janitorial services at a monthly rate of $300.Customers have three payment options:
If Chicago Cleaning is an accrual basis taxpayer:

I.All cash payments are taxable when they are received.
II.One-year advance payments must be included in income in the year they are received.
III.Two-year advance payments attributable to service in two years;hence,must be included in income in the year they are received.
IV.One-year advance payments may be deferred: $280 would be included in income for each month of service provided.
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• A)Only statement I is correct.
• B)Only statement II is correct.
• C)Only statement III is correct.
• D)Only statements II and III are correct.
• E)Only statement IV is correct.

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Definitions:

CCA Class

Classified as Capital Cost Allowance, it refers to the categorization in tax systems for claiming depreciation expense for tax purposes.

Borrowed Funds

Money that has been obtained through loans or credit from financial institutions or individuals, which typically needs to be repaid with interest.

Incremental Annual Cash Flow

The additional cash flow an organization receives from taking on a new project or investment, calculated on an annual basis.

CCA Class

A category within the Capital Cost Allowance system in Canada for tax depreciation of assets.