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ABC Company provided the following income items to its outside accountant. This is the first time...

ABC Company provided the following income items to its outside accountant. This is the first time the accountant has worked with ABC, and during the initial meeting she failed to ask if ABC is an accrual basis taxpayer or a cash basis taxpayer. Calculate ABC’s income using both methods, Accrual base and Cash base, so the accountant is ready for her next meeting with them. You are calculating ABC’s income as of December 31, 2019. Include explanations in your calculation.

  • $10,000 received December 31, 2019 for advertising services to be rendered in January 2019
  • $3,500 for a pending lawsuit which should be settled in March 2020 – ABC is the plaintiff and is expected to win the suit and receive the proceeds March of 2020.
  • $13,500 received December 15, 2019 for advertising services rendered in October 2019
  • $15,000 for advertising services rendered in November 2018; however, the check was left with the brother of the CEO of ABC. Both the brother and the CEO saw each other at a Christmas party on December 30, 2019 and the brother offered to go to his car to get the check for the CEO. The CEO declined because he didn’t want the party to turn into a business party. Check was not received and cashed by the CEO January 15, 2020.
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