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Drake Appliance Company, an accrual basis taxpayer, sells home appliances and service contracts
Drake Appliance Company, an accrual basis taxpayer, sells home appliances and service contracts. Determine the effect of each of the following transactions on the company's 2019 gross income assuming that the company uses any available options to defer its taxes.
a. In December 2018, the company received a $1,200 advance payment from a customer for an appliance that Drake special ordered from the manufacturer. The appliance did not arrive from the manufacturer until January 2019, and Drake immediately delivered it to the customer. The sale was reported in 2019 for financial accounting purposes.
Expert Solution
Explanation
According to our question
The company received advance payment in 2018 but the good not delivered in 2018
The Good is delivered in 2019. So because of this sale was recorded in 2019 for financial accounting purposes.
Thus, the amount of $1200 will include in 2019 gross income.
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