Question

In October of the current year, Jasmine received a $15,520 payment from a client for 32...

In October of the current year, Jasmine received a $15,520 payment from a client for 32 months of rent. The rental period begins on September 1 of this year. This amounts to $485 per month. Jasmine is a calendar-year taxpayer.

What amount of the $15,520 payment, if any, must Jasmine recognize this year if she uses the accrual method of accounting?

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Answer #1

Answer:

Determination of amount of the $15,520 payment, if any, must Jasmine recognize this year if she uses the accrual method of accounting:

Amount to be recognized for the period starting from 1st September till 31st December as jasmine is a calendar-year taxpayer & therefore she must be recognized rental receipt from the client for the 4 months i.e. September to December.

Amount to be recognized = $15,520 x 4/32

= $485 x 4 months

= $1,940

Therefore, Jasmine must recognise $1,940 rental receipt from the client this year if she uses the accrual method of accounting.

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