Detailed Answer
(b) The requirement is to select the correct statement
regarding the $1,000 of additional income determined by
Stewart, an accrual method corporation. Under the accrual
method, income generally is reported in the year earned. If an
amount is included in gross income on the basis of a reasonable
estimate, and it is later determined that the exact amount is more,
then the additional amount is included in income in the tax year
in which the determination of the exact amount is made. Here,
Stewart properly accrued $5,000 of income for 2012 on the basis
of a reasonable estimate and discovered that the exact amount
was $6,000 in 2013. Therefore, the additional $1,000 of income
is properly includible in Stewart’s 2013 income tax return.