Calculating Hank's Gross Income for the Current Year
Understanding Hank's Situation
Although Hank is retired, he is an excellent handyman and often works part time on small projects for neighbors and friends. Last week his neighbor, Mike, offered to pay Hank $500 for minor repairs to his house. Hank completed the repairs in December of this year.
Hank uses the cash method of accounting and is a calendar-year taxpayer.
Computing Hank's Gross Income
To calculate Hank's gross income for this year, we need to consider the $500 he received for the minor repairs to Mike's house.
Alternative Transactions
- Hank receives $500 in cash from Mike for the repairs: Hank's gross income for this year includes the $500 received for his handyman services.
What is Hank's gross income for this year from each of the following alternative transactions?
Hank's gross income for the current year includes the $500 he received for handyman services, as he uses the cash method of accounting and is a calendar-year taxpayer.
Explanation: The subject of the question is Business, specifically focusing on accounting and taxation. The question asks to compute Hank's gross income for the current year under different transaction scenarios related to part-time handyman work. As Hank uses the cash method of accounting and is a calendar-year taxpayer, his gross income would include the $500 he received for his services in December of this year. With the cash method of accounting, income is recognized when cash is received, and expenses when they are paid. Therefore, any income Hank received this year for his services will be included in this year's gross income.