Hello! I need help with this memorandum on the picture Here is the steps Please

Question

Hello! I need help with this memorandum on the picture Here is the steps Please write a short introduction introducing the client, the facts, and the issue. The introduction should be no longer than three or four sentences 1. Summary of the facts Write a summary of relevant facts. 2. Issues If there is only one issue, simply write the issue as a question, if there are multiple issues, write each issue as a question, and list each question. You might want to incorporate the main section, regulation, or court opinion that applies to the issue as part of the question. 3. Application The application should be organized according to the issues 4. Conclusion The conclusion should also be organized issues, the conclusion should answer the issue and point out pros and cons of the solution according to the

Explanation / Answer

Introduction of client

Our client is a sole properitor who runs a popular CPA exam review course. He charges fee for the course and provides a refund policy in case of students who didnot clear CPA exams conducted by the body authorised to conduct the exams.

Issue

Whether professor xavier should show the fee collected from students in Form 1040 in year 2017 or 2018?? or whether the method adopted by him is correct or not??

Application

In the given case professor Xavier should recognise his income in year 2017 and show in Form 1040 in 2017 itself and should not wait until actual refund of fee is determined.

He should make an estimate/ provision for the number of students expected to whom refund has to be made (like in previous year refund has to be made only to 20% students) and recognise rest of his income earned in 2017.

Conclusion

Income has to be shown in 2017 form 1040.Pros of this disclosure is disclosure and taxation of income in the year in which it has been earned.

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