Office Palace, Inc

question 51

Multiple Choice

Office Palace, Inc., leased an all-in-one printer to a new customer, Ashley, on December 27, 2012.The printer was to rent for $600 per month for a period of 36 months beginning January 1, 2013.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 2012, if Office Palace is an accrual basis taxpayer.
• B)$7,800 in 2013, if Office Palace is a cash basis taxpayer.
• C)$2,700 in 2012, if Office Palace is a cash basis taxpayer.
• D)$1,200 in 2012, if Office Palace is an accrual basis taxpayer.
• E)None of the above.

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Definitions:

Lump Amount

A single large sum payment or investment, as opposed to smaller, regular payments or investments.

Retirement

The period in life when one chooses to permanently leave the workforce behind, usually upon reaching a certain age or financial standing.

Compounded Semi-Annually

A method where interest is calculated and added to the principal at six-month intervals, resulting in interest on interest.

Annuity

A series of equal payments at regular intervals.