Franco is owner and operator of a cleaning service who uses the accrual method of accounting. He receives the following payments on December 31, 2017, the last business day of his tax year:
$5,000 - Checks received from customers for services rendered during November and December 2017 . The checks are deposited in his bank account on January 4, 2018.
$4,000 - Checks received from customers for
services to be rendered during 2017 . The checks are received in the morning mail and deposited in his bank account on December 31, 2017.
$2,400 - A check received from a customer for a service contract. The services under the contract are to be rendered in 2018 . The customer met Franco at the New Year's Eve party and gives Franco the check at 11:30 p.m. The check is deposited in his bank account on January 4, 2018.
How much of the $11,400 collected by Franco on December 31 must be included in his 2017 gross income?
a. $5,000
b. $6,400
c. $7,400
d. $9,000
e. $11,400
a
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