The Maroon & Orange Gym, Inc

Multiple Choice

The Maroon & Orange Gym, Inc., uses the accrual method of accounting. The corporation sells memberships that entitle the member to use the facilities at any time. A one-year membership costs $480 ($480/12 = $40 per month) ? a two-year membership costs $720 ($720/24 = $30 per month) . Cash payment is required at the beginning of the membership period. On July 1, 2018, the company sold a one-year membership and a two-year membership. For financial reporting purposes, Maroon reports the membership income ratably over the number of months involved. The company should report as gross income from the two contracts:

A) $1,200 in 2018.
B) $960 in 2018.
C) $180 in 2020.
D) $780 in 2019.
E) None of these.