The Maroon & Orange Gym,Inc

question 121

Multiple Choice

The Maroon & Orange Gym,Inc. ,uses the accrual method of accounting.The corporation sells memberships that entitle the member to use the facilities at any time.A one-year membership costs $480 ($480/12 = $40 per month) ;a two-year membership costs $720 ($720/24 = $30 per month) .Cash payment is required at the beginning of the membership period.On July 1,2014,the company sold a one-year membership and a two-year membership.The company should report as gross income from the two contracts:

• A)$1,200 in 2014.
• B)$960 in 2014.
• C)$180 in 2016.
• D)$780 in 2015.
• E)None of these.

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Definitions:

Probate

The legal process through which a deceased person's estate is properly distributed to heirs and designated beneficiaries and any debt owed to creditors is paid off.

Constructive Trust

A legal remedy imposed to address unjust enrichment, where property is held by someone who should not profit from it.

Incorporated by Reference

A method in legal documents where the contents of an external document are made a part of the main document by mentioning it explicitly.

Testator

An individual who has made a will or testament to dictate the distribution of their assets after their death.