Question - Platinum Fitness pays rent of $60,000 per year for its space ($5,000 per month). Its lease terminated on October 31, 2016. On November 15, 2016, Platinum Fitness paid $60,000 for a new lease until October 31, 2017.
(a) How should Platinum Fitness treat this payment if it operates as an accrual basis taxpayer?
(b) How should Platinum Fitness treat this payment if it operates as a cash basis taxpayer?
Please explain answer in full so I can properly learn from this problem. Doing only the computation is not enough. Please put answer/explanation in a word document, the problem shouldn't require more than one page of computation and answer explanation.