Question

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. mike gave hank tickets in december to the big game in january. the tickets have a face value of $50 but hank could sell them for $460. hank went to the game with his son. what is hank's gross income for this year?

Answer 1

Answer:

As per Cash Basis of Accounting, The income of mike shall be,

Tickets of Big Game       Dr.$460

Income from repair Work   Cr.$460

Explanation:

Generally Gross Income means any income realized during the year whether it is realized in cash or in kind.

In our case, mike has received big game tickets. Therefore the realizable value of tickets which is $460 is mike's income.