Office Palace, Inc., leased an all-in-one printer to a new customer, Ashley, on December 27, 2018. The printer was to rent for $600 per month for a period of 36 months beginning January 1, 2019. Ashley was required to pay the first and last month's rent at the time the lease was signed. Ashley was also required to pay a $1,500 damage deposit. Office Palace must recognize as income for the lease:

a. $0 in 2017, if Office Palace is an accrual basis taxpayer. b. $7,800 in 2018, if Office Palace is a cash basis taxpayer. c. $2,700 in 2017, if Office Palace is a cash basis taxpayer. d. $1,200 in 2017, if Office Palace is an accrual basis taxpayer. e. None of these.

Question

Business

Leandro Mcgee

3 September, 14:32

Office Palace, Inc., leased an all-in-one printer to a new customer, Ashley, on December 27, 2018. The printer was to rent for $600 per month for a period of 36 months beginning January 1, 2019. Ashley was required to pay the first and last month's rent at the time the lease was signed. Ashley was also required to pay a $1,500 damage deposit. Office Palace must recognize as income for the lease:

a. $0 in 2017, if Office Palace is an accrual basis taxpayer. b. $7,800 in 2018, if Office Palace is a cash basis taxpayer. c. $2,700 in 2017, if Office Palace is a cash basis taxpayer. d. $1,200 in 2017, if Office Palace is an accrual basis taxpayer. e. None of these.

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Answers (1)

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Joel Nash · Answer 1

d. $1,200 in 2017, if Office Palace is an accrual basis taxpayer

Explanation:

The unearned income, such as rent is generally taxed in the year in which it was received regardless of the accounting method the tax payer uses and her Office Palace, Inc. received rent for first and last month of $ 600 each on December 27,2017 so it need to recognised as lease income for the year 2017.