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Problem $4-36($LO$.2)$

Drake Appliance Company, an accrual basis taxpayer, sells home appliances and service contracts. Determine the effect of each of the

following transactions on the company's $2023$ gross income assuming that the company uses any available options to defer its taxes.

a$.$ In December $2022,$ the company received a $$1,200$ advance payment from a customer for an appliance that Drake special$-$ordered from

the manufacturer. The appliance did not arrive from the manufacturer until January $2023,$ and Drake immediately delivered it to the

customer. The sale was reported in $2023$ for financial accounting purposes.

What amount is included in the $2023$ gross income?

$

b$.$ In October $2023,$ the company sold a $6-$month service contract for $$240.$ The company also sold a $36-$month service contract for $$1,260$

in July $2023.$

Assuming a calendar year$-$end, what amount is included in the $2023$ gross income?

$

c$.$ On December $31,2023,$ the company sold an appliance for $$1,200.$ The company received $$500$ cash and a note from the customer for

$$700$ and $$240$ interest, to be paid at the rate of $$10$ a month for $24$ months. Because of the customer's poor credit record, the fair market

value of the note was only $$600.$ The cost of the appliance was $$750.$

What amount is included in the gross receipts and what is the gross profit?

The $2023$ gross receipts from the transaction are s

and the gross profit from the transaction is $

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