Question

< Back This window shows your responses and what was mal 21 Required information The following information applies to the questions displayed below.) Part 1 of 2 This year (year O) Elizabeth agreed to a three-year service contract with an engineering consulting firm to improve efficiency in her factory. The contract requires Elizabeth to pay the consulting firm $1,075 for each instance that Elizabeth requests their assistance. The contract also provides that Elizabeth only pays the consultants if their advice increases efficiency as measured 12 months from the date of service. This year Elizabeth requested advice on three occasions and she has not yet made any payments to the consultants (Leave no answers blank. Enter zero if applicable.) 044 34 points awarded a. How much should Elizabeth deduct in year o under this service contract if she uses the accrual method of accounting? 3.225

Answer 1

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Since liability is contingent upon a future event i.e. Increased efficiency, occurring after the end of the year, the liability is not fixed.

And hence Elizabeth is not allowed to recognize any deduction based on accrual method even though consultant has provided the services.

Hence DEDUCTION AMOUNT=NIL