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ACCRUAL METHOD OF ACCOUNTING IS USED In Year 2, Ms. Lamont, an accrual-basis, calendar-year taxpayer...

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Accounting

ACCRUAL METHOD OF ACCOUNTING IS USED

In Year 2, Ms. Lamont, an accrual-basis, calendar-year taxpayer under contract, received a $14,000 advance payment for consulting services to be performed ratably from October 1, Year 1, to December 1, Year 2. As of December 31, Year 2, however, the services contracted were not fully completed.

What amounts should Ms. Lamont include in income for tax years ending in Year 1, Year 2, and Year 3, assuming the consulting services are completed early in Year 3 and she prefers to defer income?

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