Question - Orange Apartments, an accrual basis taxpayer, allows its renters to pay by the year in advance ($500 per year), or two years in advance ($950). In September 2016, the company collected the following amounts applicable to future services:
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October 2016-September 2018 services (two-year contracts)
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$144,000
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October 2016-September 2017 services (one-year contracts)
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128,000
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Total
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$272,000
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As a result of the above, Orange Apartments should report as gross income:
a. $128,000 in 2016.
b. $222,000 in 2017
c. $168,000 in 2017.
d. $272,000 in 2016.
e. None of these choices are correct.