With Respect to Income from Services,which of the Following Is

question 72

Multiple Choice

With respect to income from services,which of the following is true?

• A) The income is always amortized over the period the services will be rendered by an accrual basis taxpayer.
• B) A cash basis taxpayer can spread the income from a 12-month service contract over the contract period.
• C) If an accrual basis taxpayer sells a 24-month service contract on July 1, 2011, for $2,400, the taxpayer's 2012 gross income from the contract is $1,800.
• D) If the accrual basis taxpayer sells a 12-month service contract on July 1, 2011, all of the income is recognized in 2012.
• E) None of the above.

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Definitions:

Financing Costs

Financing costs are expenses incurred by an entity in the process of borrowing funds, including interest payments and other related fees.

Market Value

The ongoing trading value of an asset or service in the market.

Preferred Stock

A type of stock that provides holders with a fixed dividend prior to any dividend payments to common stockholders, and typically does not carry voting rights.