Question

Bigham Corporation, an accrual basis calendar year taxpayer, sells its services under 12-month and 24-month contracts....

Bigham Corporation, an accrual basis calendar year taxpayer, sells its services under 12-month and 24-month contracts. The corporation provides services to each customer every month. On July 1, 2017, Bigham sold the following customer contracts:

Length of contract Total Proceeds
12 months $25,600
24 months $51,200

Determine the income to be recognized in taxable income in 2017 and 2018.

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Answer #1
In Year 2017:
Income to be recognized for 12 month contract 12800
(25600*6/12)
Income to be recognized for 24 month contract 12800
(51200*6/24)
Total revenue to be recognized for Year 2017 25600
In Year 2018
Income to be recognized for 12 months contract 12800
(25600*6/12)
Income to be recognized for 24 month contract 25600
(51200*12/24)
Total revenue to be recognized for Year 2018 38400
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