Zephex is a calendar year corporation. On December 1, 2015, Zephex received a $1

Question

Zephex is a calendar year corporation. On December 1, 2015, Zephex received a $12,000 check from a tenant that leases office space owned by Zephex. This payment was rent for the four-month period from December 1, 2015, through March 31, 2016. On December 2, 2015, Zephex billed a client $38,250 for services rendered to the client in November. The client did not pay the bill until January 14, 2016. a. If Zephex is a cash basis taxpayer, how much 2015 income should it recognize with respect to the above transactions?

Explanation / Answer

Being a calendar year company, Zephex has a year-end at 31st December each year.

Being a cash basis taxpayer, Zephex will recognize revenue of $12,000 check received even if this includes a deferred revenue. Also, the client billing cannot be recognized since cash wasn't received within the calender year.

So, Income = $12,000

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