Office Palace,Inc

question 14

Multiple Choice

Office Palace,Inc.,leased an all-in-one printer to a new customer,Ashley,on December 27,2011.The printer was to rent for $600 per month for a period of 36 months beginning January 1,2012.Ashley was required to pay the first and last month's rent at the time the lease was signed.Ashley was also required to pay a $1,500 damage deposit.Office Palace must recognize as income for the lease:

• A) $0 in 2011, if Office Palace is an accrual basis taxpayer.
• B) $7,800 in 2012, if Office Palace is a cash basis taxpayer.
• C) $2,700 in 2011, if Office Palace is a cash basis taxpayer.
• D) $1,200 in 2011, if Office Palace is an accrual basis taxpayer.
• E) None of the above.

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Definitions:

Equivalent Units

A method used in process costing to convert partially completed goods into a comparable number of fully completed units.

Conversion Costs

Costs incurred to convert raw materials into finished products, often including labor and overhead.

First-In, First-Out Method

An inventory valuation method which assumes that the first items placed in inventory are the first sold.

Ending Work

Refers to the final processes or activities completed on a project or product before it is considered to be finished.