Question

Joyce is self-employed and uses the calendar year and the accrual method of accounting.She reports the following activities for December:1.) Received $10,000 from clients for services to be performed next year2.) Received $30,000 for services performed in December3.) Reports $15,000 in accounts receivable for work performed in December4.) Received $2,000 for services performed in NovemberRequired:What amount must Joyce include in gross income for December?

Answer 1

The amount that Joyce must include in gross income for December is $45,000.

Step-by-step explanation:

For cash received for services to be performed next year ,the cash amount will not be included in gross income of this year on the basis of accrual accounting because this pertains to expenses which will be incurred next year.

On cash basis, amounts received in advance are included in current year income calculation.

Received $30,000 for services performed in December

Included in calculation of income for December as this relates to services performed in December.

Reports $15,000 in accounts receivable for work performed in December

Included in calculation of income for December as this relates to work performed during December.

Received $2,000 for services performed in November

Not included as this pertains to services performed in November .Should be included in calculation of November income as Accrued income.

Gross Income for December = $30000 + $15000

= $45,000

Therefore, The amount that Joyce must include in gross income for December is $45,000.