ACC 456 STUDY Extraordinary Success/acc456study.com ACC 456 STUDY Extraordinary Success/acc456study. | Page 9

·
a.Compute her net income from the business assuming she
elects the accrual method.
·
b.Compute her net income from the business assuming she
elects the cash method.
·
c.Would paying the $15,000 she owes for operating expenses
before year-end change her net income under accrual method of
reporting? Under the cash method?
3-42
Rental Income. Ed owns Oak Knoll Apartments. During the year,
Fred, a tenant, moved to another state. Fred paid Ed $1,000 to cancel
the two-year lease he had signed. Ed subsequently rented the unit to
Wayne. Wayne paid the first and last months’ rents of $800 each and a
security deposit of $500. Ed also owns a building that is used as a
health club. The club has signed a fifteen-year lease at an annual
rental of $17,000. The owner of the club requested that Ed install a
swimming pool on the property. Ed declined to do so. The owner of the
club finally constructed the pool himself at a cost of $15,000. What
amount must Ed include in gross income?
3-43
Gross Income. Susan’s salary is $44,000 and she received dividends of
$600. She received a statement from SJ partnership indicating that her
share of the partnership’s income was $4,000. The partnership
distributed $1,000 to her during the year and $600 after yearend. She
won $2,000 in the state lottery and spent $50 on lottery tickets. Which
amounts are taxable?
3-44