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e. 4. Bob, owns a building, and decides to rent out an apartment in the building to Stacy for a two (2) year lease, starting on December 1, 2022. At the start of the lease, Bob requests and receives a $1,500 damage deposit from Stacy, to be applied against any damage to the apartment or failure by Stacy to pay rent due under the lease. Bob places the damage deposit received in a separate account in Stacy's name. In November 2024, Stacy loses her job. Unable to pay her rent, she asks Bob to apply the damage deposit against her rent obligation, which he does on November 21, 2024. Which of the following statements, if any, is correct? a. Bob has no taxable income from the damage deposit for any tax years covered by the lease. b. Bob has taxable income of $1,500 in 2022 because the damage deposit is a prepayment of rent. c. Bob has taxable income of $1,500 in 2023 because he cannot defer prepayment beyond one year following receipt. d. Bob has taxable income of $1,500 in 2024, the tax year in which Bob applies the damage deposit against Stacy's rent due. e. None of the above statements is true.

e. 4. Bob, owns a building, and decides to rent out an apartment in the building to Stacy for a two (2) year lease, starting on December 1, 2022. At the start of the lease, Bob requests and receives a $1,500 damage deposit from Stacy, to be applied against any damage to the apartment or failure by Stacy to pay rent due under the lease. Bob places the damage deposit received in a separate account in Stacy's name. In November 2024, Stacy loses her job. Unable to pay her rent, she asks Bob to apply the damage deposit against her rent obligation, which he does on November 21, 2024. Which of the following statements, if any, is correct? a. Bob has no taxable income from the damage deposit for any tax years covered by the lease. b. Bob has taxable income of $1,500 in 2022 because the damage deposit is a prepayment of rent. c. Bob has taxable income of $1,500 in 2023 because he cannot defer prepayment beyond one year following receipt. d. Bob has taxable income of $1,500 in 2024, the tax year in which Bob applies the damage deposit against Stacy's rent due. e. None of the above statements is true.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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e. 4. Bob, owns a building, and decides to rent out an apartment in the building to Stacy for a two (2) year lease, starting on December 1, 2022. At the start of the lease, Bob requests and receives a $1,500 damage deposit from Stacy, to be applied against any damage to the apartment or failure by Stacy to pay rent due under the lease. Bob places the damage deposit received in a separate account in Stacy's name. In November 2024, Stacy loses her job. Unable to pay her rent, she asks Bob to apply the damage deposit against her rent obligation, which he does on November 21, 2024. Which of the following statements, if any, is correct? b. a. Bob has no taxable income from the damage deposit for any tax years covered by the lease. Bob has taxable income of $1,500 in 2022 because the damage deposit is a prepayment of rent. Bob has taxable income of $1,500 in 2023 because he cannot defer prepayment beyond one year following receipt. C. d. Bob has taxable income of $1,500 in 2024, the tax year in which Bob applies the damage deposit against Stacy's rent due. e. None of the above statements is true.
Transcribed Image Text:e. 4. Bob, owns a building, and decides to rent out an apartment in the building to Stacy for a two (2) year lease, starting on December 1, 2022. At the start of the lease, Bob requests and receives a $1,500 damage deposit from Stacy, to be applied against any damage to the apartment or failure by Stacy to pay rent due under the lease. Bob places the damage deposit received in a separate account in Stacy's name. In November 2024, Stacy loses her job. Unable to pay her rent, she asks Bob to apply the damage deposit against her rent obligation, which he does on November 21, 2024. Which of the following statements, if any, is correct? b. a. Bob has no taxable income from the damage deposit for any tax years covered by the lease. Bob has taxable income of $1,500 in 2022 because the damage deposit is a prepayment of rent. Bob has taxable income of $1,500 in 2023 because he cannot defer prepayment beyond one year following receipt. C. d. Bob has taxable income of $1,500 in 2024, the tax year in which Bob applies the damage deposit against Stacy's rent due. e. None of the above statements is true.
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