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Speak Corporation, a calendar-year, accrual-basis taxpayer, sell packages of foreign langauge lessons to individuals planning to...

Speak Corporation, a calendar-year, accrual-basis taxpayer, sell packages of foreign langauge lessons to individuals planning to work overseas. In December 2018, it sold and received payment for $600,000 of 24-month lesson packages to be provided evenly through 2019 and 2020. Speak Corporation will recognize the $600,000 of income: A all in 2018, B half in 2019 half in 2020, C all in 2019, D all in 2020

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Ans is C all in 2019

Explanation: Since Speak corporation is a calendar year taxpayer and maintains its books on accrual basis, but the payment of services to be provided in 2019 and 2020 is received in year 2018, and as per the provisions an accrual basis taxpayer defer the recognition of revenue for future services but there is limit on deferment, it can not defer recognition beyond the year following the year in which payment is received. since advance received in 2018 and it has to recognize it in 2019.

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