Your Ask Joey ™ Answer

Cash to Accrual for Rent Revenue MCQ

Marr Corp. reported rental revenue of $2,210,000 in its cash basis federal income tax return for the year ended November 30, Year 2. Additional information is as follows:

Rents receivable – November 30, Year 2        $ 1,060,000

Rents receivable – November 30, Year 1        800,000

Uncollectible rents written off during the fiscal year 30,000

Under the accrual basis, Marr should report rental revenue of:

A) $2,440,000

B) $1,980,000

C) $1,920,000

D) $2,500,000

$2,500,000 is correct. We can create a rent receivable rollforward to determine what rent revenue would be under the accrual basis.

Our starting point is the November 30, Year 1 balance of $800,000. Rent revenue is our PLUG. We would decrease rent receivable for the $2,210,000 of cash rent collected. Lastly, we would also decrease rent receivable for $30,000 of write-offs (rent receivable is credited in a write-off).

The ending rent receivable balance is $1,060,000. Based on the rollforward, rent revenue would be $2,500,000.

All of the other options are incorrect.

Back To All Questions

You might also be interested in...

  • Three Reasons to Become an Accountant

    If you’re someone who is intrigued by numbers, enjoys problem-solving and wants to help others, then accounting might be the perfect career for you. While some people may be put off by its unalluring reputation, accounting is an excellent career choice that has many benefits. In this article, we look at three of the reasons...

  • Qualified Retirement Planning: Tax Advantages & Disadvantages

    Home Advantages and Disadvantages of Tax-Free and Deferred-Tax Retirement Plans What are “qualified retirement plans” and how can they be effective for tax planning? Well, there are plenty of tax savings advantages to individuals contributing to tax-free retirement accounts, as well as tax-deferred retirement accounts. However, this doesn’t necessarily mean that there are no disadvantages...

  • CPA Evolution Survival Guide

    Download Your eBook by selecting the download icon in the top right-hand corner