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Examples of End of Year Reporting

Introduction:
Realty Corporation, an accrual-basis, calendar-year corporation, agrees to rent office space to Tenant Company for $3,000 per month, beginning from January 1, year 2. On December 15, year 1, Tenant gives Realty Corporation a $3,000 deposit in addition to rent for the months of January and February. In year 2, Tenant pays rent for the months of March and April, and on May 15, Tenant closes its business. Realty withholds $1,500 from the deposit for unpaid rent and $1,000 for damages. Realty Corporation refunds the balance of the deposit to Tenant on May 20, year 2.

Task:

How much income should Realty Corporation report in year 1 from the above-mentioned transactions for tax and financial accounting?
How much income should Realty Corporation report in year 2?

Solution Preview

End of Year Reporting

Introduction:

Realty Corporation, an accrual-basis, calendar-year corporation, agrees to rent office space to Tenant Company for $3,000 per month, beginning from January 1, year 2. On December 15, year 1, Tenant gives Realty Corporation a $3,000 deposit in addition to rent for the months of January and February. In year 2, Tenant pays rent for the months of March and April, and on May 15, Tenant closes its business. Realty withholds $1,500 from the deposit for unpaid rent and $1,000 for damages. Realty Corporation refunds the balance of the deposit to Tenant on May 20, year 2.

Task:
1. How much income should Realty Corporation report in year 1 from the above-mentioned transactions for tax and financial accounting?

Since Realty Corporation operates as a calendar-year company, using the accrual-basis method accounting, "it cannot recognize revenue [for book ...

Solution Summary

End of Year Reporting - Realty Corporation, an accrual-basis, calendar-year corporation, agrees to rent office space to Tenant Company for $3,000 per month

$2.19