![crodriguez87](/avatars/12927.jpg)
crodriguez87
13.10.2020 •
Business
Rip garage, inc. (459 ellis avenue, harrisburg, pa 17111), is an accrual basis taxpayer that repairs automobiles. in late december 2017, the company repaired samuel mosley's car and charged him $1,000. samuel did not think the problem had been fixed, so he refused to pay; thus, trip refused to release the automobile. in early january 2018, trip made a few adjustments under the hood; trip then convinced samuel that the automobile was working properly. at that time, samuel agreed to pay only $900 because he did not have the use of the car for a week. trip said "fine," accepted the $900, and released the automobile to samuel. an irs agent thinks trip, as an accrual basis taxpayer, should report $1,000 of income in 2017, when the work was done, and then deduct a $100 business loss in 2018. prepare a memo to susan apple, the treasurer of trip, with your recommended treatment for the disputed income.
Solved
Show answers
More tips
- C Computers and Internet IMHO: What is it, why is it important, and how to use it?...
- H Health and Medicine How to Calculate Your Ideal Weight?...
- S Style and Beauty Discover the Art of Nail Design: How Do You Paint Your Nails?...
- P Philosophy How to Develop Extrasensory Abilities?...
- O Other Everything You Need to Know About Kudyabliks...
- C Computers and Internet The Twitter Phenomenon: What it is and How to Use it...
- C Computers and Internet How to Choose a Laptop: Expert Guide and Tips...
- C Computers and Internet How to Choose a Monitor?...
- H Horoscopes, Magic, Divination Where Did Tarot Cards Come From?...
- S Style and Beauty How to Make Your Lips Fuller? Ideas and Tips for Beautiful Lips...
Answers on questions: Business
- B Business How many fewer shirts are sold at the new demand level for any given price?...
- B Business Intangible assets a. should be reported under the heading property, plant, and equipment. b. are not reported on the balance sheet because they lack physical substance. c. should...
- A Arts Select the sentence with an appositive phrase and a relative pronoun. 1 A tiny cat named Tiny sits all day in the window and watches people pass by. 2 The cat, which is a Calico,...
- B Business On october 1, 2018, jay crowley established affordable realty, which completed the following transactions during the month: a. jay crowley transferred cash from a personal bank account...
- M Mathematics Emily is entering a bicycle race for charity. her mother pledges $0.30 for every 0.75 mile she bikes. if emily bikes 12 miles, how much will her mother donate?...
- B Biology Emily sprains her ankle on her way home from school. her mom suggests she use an “instant cold pack” to reduce the swelling. when emily’s mom hands her the cold pack, it is room...
Ответ:
MEMO
To: Treasurer of Trip Garage, Inc.
From: Me
Subject: Dispute over accrued revenue
Mrs. S. Apple,
Good evening. Regarding your dispute over accrued revenue generated form the repair of Mr. Mosley's car, I must inform you the following:
Trip Garage, Inc., is an accrual basis taxpayer, therefore, revenues must be recorded once the repair service was completed, not when the invoice was collected.
In future occasions when similar problems show up, you should record an allowance for doubtful accounts. This way, if you believe that an account receivable is unlikely to be collected, it will be not considered for the year's financial records. This adjusting journal entry must be recorded before the end of the year, if not, all related revenues must be included in the years income statement.
Regards,
Me
Explanation:
Accrual taxpayers are required to record revenues once the revenue generating activity has been completed, i.e. Trip should have recorded $1,000 in revenue during 2017:
Dr Accounts receivable 1,000
Cr Service revenue 1,000
If Trip didn't consider that it would be able to collect the $1,000 receivable, then it should have recorded it as bad debt expense:
Dr Bad debt expense 1,000
Cr Allowance for doubtful accounts 1,000
If thy did not record the bad expense, then the IRS agent is right, and the $1,000 must be included in the 2017 income statement.
Ответ:
213
Step-by-step explanation:
I took the quiz