Business Taxation
Copier Choice Corporation (CCC) is a calendar year, accrual method, C corporation engaged in the business of selling, leasing, and servicing copiers primarily to service businesses such as accounting and law firms. During the fourth quarter of 2017, CCC received the following two payments:
-Service payment: CCC received a $375,000 fee for a 15-month service contract on 375 copiers sold be CCC in Oct of 2017 to a national law firm. Under the terms of the contract, CCC will provide all routine maintenance and service work on the copiers sold to the national law firm from Nov 1, 2017 through Jan 31, 2019.
-Rent payment: CCC received a $150,000 of advance rental payment from a national accounting firm in Dec 2017 on copiers it rents to the national accounting firm. The advance rent payment is for the first quarter of 2018. Under the terms of the contract, CCC requires the national accounting firm to prepay one quarter (3 months) of rent.
1) What amount of service income should CCC report in 2017, 2018, and 2019 on its financial income statements form the fourth quarter payment? Please show your work and explain your calculations.
2) What amount of service income should CCC report in 2017, 2018, and 2019 on its federal tax return from the fourth quarter payment? Please show your work and explain your calculations.
3) What amount of rent should CCC report in 2017 and 2018 on its financial income statements from the fourth quarter payment? Please show your work and explain your calculations.
4) What amount of rent income should CCC report in 2017 and 2018 on its federal tax return from the fourth quarter payment? Please show your work and explain your calculations.