Kathy, an accrual basis taxpayer, operates a gym. She sells memberships that entitle the member to...

 

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Kathy, an accrual basis taxpayer, operates a gym. She sells memberships that entitle the member to use the facilities at any time. A one-year membership costs $300 ($300/12 = $25 per month); a two-year membership costs $576 ($576/24 = $24 per month). Cash payment is required at the beginning of the membership. On July 1, Year 1, Kathy sold a one-year membership and a two-year membership. Assume both customers started using the memberships on July 1, Year 1. a. Determine the amount of income Kathy recognizes in Year 2 from the one-year contract b. Determine the amount of income Kathy recognizes in Year 2 from the two-year contract Kathy, an accrual basis taxpayer, operates a gym. She sells memberships that entitle the member to use the facilities at any time. A one-year membership costs $300 ($300/12 = $25 per month); a two-year membership costs $576 ($576/24 = $24 per month). Cash payment is required at the beginning of the membership. On July 1, Year 1, Kathy sold a one-year membership and a two-year membership. Assume both customers started using the memberships on July 1, Year 1. a. Determine the amount of income Kathy recognizes in Year 2 from the one-year contract b. Determine the amount of income Kathy recognizes in Year 2 from the two-year contract

Answer rating: 100% (QA)

Total gross income of kathy If Kathy is a cash basis taxpayer her gross income from the contracts ... View the full answer