a. How much of the $9,000 consulting services will Hank include in his income this year if he uses the cash method of accounting? What amount can Nancy deduct this year for the consulting services?
a. How much of the $9,000 consulting services will Hank include in his income this year if he uses the cash method of accounting? What amount can Nancy deduct this year for the consulting services?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Required information
[The following information applies to the questions displayed below.]
Nancy operates a business that uses the accrual method of accounting. In
December, Nancy asked her brother, Hank, to provide her business with
consulting advice. Hank billed Nancy for $9,000 of consulting services in
year 0 (a reasonable amount), but Nancy was only able to pay $6,000 of
the bill by the end of this year. However, Nancy paid the remainder of the
bill in the following year.
a. How much of the $9,000 consulting services will Hank include in his income this year if
he uses the cash method of accounting? What amount can Nancy deduct this year for the
consulting services?
Amount included by Hank
$
9,000
Amount deducted by Nancy
$
0
13](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F32d59af0-4a32-472d-ab4f-b7ede03604c4%2Fcc5670d2-a706-47b0-a18a-0f33aa42cbfe%2Fwktmndn_processed.jpeg&w=3840&q=75)
Transcribed Image Text:!
Required information
[The following information applies to the questions displayed below.]
Nancy operates a business that uses the accrual method of accounting. In
December, Nancy asked her brother, Hank, to provide her business with
consulting advice. Hank billed Nancy for $9,000 of consulting services in
year 0 (a reasonable amount), but Nancy was only able to pay $6,000 of
the bill by the end of this year. However, Nancy paid the remainder of the
bill in the following year.
a. How much of the $9,000 consulting services will Hank include in his income this year if
he uses the cash method of accounting? What amount can Nancy deduct this year for the
consulting services?
Amount included by Hank
$
9,000
Amount deducted by Nancy
$
0
13
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