Question

Molly operates a gym. She sells memberships that entitle the member to use the facilities at any time. A one-year membership costs $360 ($360/12 = $30 per month); a two-year membership costs $600 ($600/24 = $25 per month). Cash payment is required at the beginning of the membership period. On July 1, 2019, Molly sold a one-year membership and a two-year membership.

I. If Molly is a cash basis taxpayer, her 2015 gross income from the contracts is $960 ($360 + $600).
II. If Molly is an accrual basis taxpayer, her 2015 gross income from the contracts is $330 [(6/12 × $360) + (6/24× $600)].
III. If Molly is an accrual basis taxpayer, her 2016 gross income from the contracts is $630 [(6/12)($360) + $450]

a) Only I is true.
b) Only I and II are true.
c) Only II and III are true.
d) I, II, and III are true.
e) None of the above.

Answer 1

d. I, II, and III are true

Step-by-step explanation: