Question

Determine the amount of taxable income that should be reported by a cash-basis taxpayer in 2018 in each of the following independent cases: a. A taxpayer completes $700 of accounting services in December 2018 for a client who pays for the accounting b. A taxpayer is in the business of renting computers on a short-term basis. On December 1, 2018, she rents a c. Same facts as (b) except that the computer is returned on January 5, 2019. work in January 2019 computer for a $260 rental fee and recelves a $650 deposit. The customer returns the computer and is refunded the deposit on December 20. 2018. d. On December 18, 2018, a landlord rents an apartment for $625 per month and collects the first and last months' rent up front. It is customary that tenants apply the security deposit to their last month's rent upon moving out e. An accountant agrees to perform $395 of tax services for an auto mechanic who has agreed to perform repairs on the car of the accountant's wife. The mechanic repairs the car in December 2018 and the accountant starts and completes the tax work In March 2019 Complete the question by entering your answers in the tabs below. Req a to d Req e a. A taxpayer completes S700 of accounting services in December 2018 for a client who pays for the accounting work ir January 2019 b. A taxpayer is in the business of renting computers on a short-term basis. On December 1, 2018, she rents a comput $260 rental fee and receives a $650 deposit. The customer returns the computer and is refunded the deposit on Decem 20 2018 Complete the question by entering your answers in the tabs below. Req a to d Req e a. A taxpayer completes $700 of accounting services in December 2018 for a client who pays for the accounting work i January 2019 b. A taxpayer is in the business of renting computers on a short-term basis. On December 1, 2018, she rents a comput 260 rental fee and receives a $650 deposit. The customer returns the computer and is refunded the deposit on Decem 20, 2018 c. Same facts as (b) except that the computer is returned on January 5, 2019 d. On December 18, 2018, a landlord rents an apartment for $625 per month and collects the first and last months ren front. It is customary that tenants apply the security deposit to their last month's rent upon moving out. show Reqe Complete the question by entering your answers in the tabs below Req a to d Req e e. An accountant agrees to perform $395 of tax services for an auto mechanic who has agreed to perform repairs on th of the accountant's wife. The mechanic repairs the car in Dece work in March 2019 nber 2018 and the accountant starts and completes the untant echanic 2018 2019

Answer 1

Cash Basis Tax Payer
Under Cash basis of accounting revenue is recorded only when customer pays
for the services.and payables are recorded when payment is made.
a. A taxpayer completes $700 of accounting services in December 2018 for a
client who pays for the accounting work in January 2019.
$700 taxable in 2018, not or $0 in 2017
b.A taxpayer is in the business of renting computers on a short-term basis.
On December 1, 2018, she rents a computer for a $260 rental fee and receives
a $650 deposit. The customer returns the computer and is refunded the deposit
on December 20, 2018.
$260 rent is received in cash in December 2018 so it is taxable
(deposit of $650 doesn't count unless right to keep it)
c. Same facts as (b) except that the computer is returned on January 5, 2019.
$260 rent is received in cash in December 2018 so it is taxable
(deposit of $650 doesn't count unless right to keep it)
d. On December 18, 2018, a landlord rents an apartment for $625 per month moving out.
and collects the first and last months' rent up front. It is customary that tenants apply
the security deposit to their last month's rent upon moving out.
$1,250 ($625 for 2 months)
Since cash was received in December 2018 it will be taxed.
e. An accountant agrees to perform $395 of tax services for an auto mechanic who has
agreed to perform repairs on the car of the accountant's wife. The mechanic repairs the
car in December 2018 and the accountant starts and completes the tax work in March 2019.
The accountants records $395 in 2018, but the mechanic records $395 in 2019.