Franco Is Owner and Operator of a Cleaning Service Who $\$ 5,000$

question 42

Multiple Choice

Franco is owner and operator of a cleaning service who uses the accrual method of accounting. He receives the following payments on December 31, 2017, the last business day of his tax year:
?
$\$ 5,000$ - Checks received from customers for services rendered during November and December 2018. The checks are deposited in his bank account on January 4, 2019.
$\$ 4,000$ - Checks received from customers for services to be rendered during 2019 . The checks are received in the morning mail and deposited in his bank account on December 31, 2018.
$\$ 2,400$ - A check received from a customer for a service contract. The services under the contract are to be rendered in 2019. The customer met Franco at the New Year's Eve party and gives Franco the check at 11:30 p.m. The check is deposited in his bank account on January 4, 2019.
How much of the $11,400 collected by Franco on December 31 must be included in his 2018 gross income?

• A)$5,000
• B)$6,400
• C)$7,400
• D)$9,000
• E)$11,400

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Definitions:

Organic Substances

Compounds containing carbon and typically derived from living organisms, essential to biological processes.

Vitamins

Vitamins are organic compounds that are essential in small amounts for supporting normal physiological function.

Thyroid Hormones

Bioactive compounds produced by the thyroid gland that regulate metabolism, energy generation, and neuromuscular function.

Iodine

A chemical element necessary for thyroid hormone production, often found in iodized salt, seafood, and dairy products.