Firm B, a calendar year, cash basis taxpayer, leases lawn and
garden equipment. During December, it...
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Accounting
Firm B, a calendar year, cash basis taxpayer, leases lawn andgarden equipment. During December, it received the following cashpayments. To what extent does each payment represent currenttaxable income to Firm B?
$988 repayment of a loan from an employee. Firm B loaned $950 tothe employee six months ago, and the employee repaid the loan withinterest.
$1,050 deposit from a customer who rented mechanical equipment.Firm B must return the entire deposit when the customer returns theundamaged equipment.
$10,900 short-term loan from a local bank. Firm B gave the bank awritten note to repay the loan in one year at 4 percentinterest.
$1,258 prepaid rent from the customer described in part b. The rentis $17 per day for the 74-day period from December 17 throughFebruary 28.
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In cash basis of taxation the income of an individual is taxable as and when the amount is actually received even though the amount is not earned like in accrual basis of taxation In the
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