What choices does specialty training have as

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At the end of October, year 1, Specialty Training, an accrual-basis, calendar-year taxpayer, was hired by Dunbar Company to provide a six-week training program for its employees. Specialty was paid its full training fee of $30,000 on the first day of training. After five weeks of training sessions, Dunbar cancelled the last week of training and demanded a refund of $5,000 because its employees felt the training was misrepresented in that it did not provide the in-depth coverage of the topics they desired. In January, year 2, Specialty refunded $5,000 to Dunbar. Specialty’s marginal tax rate for year 1 is 34 percent.

a. What choices does Specialty Training have as to how to account for the $5,000 refund?

b. If Specialty's marginal tax rate in year 2 is 39 percent, how should the company account for the refund for tax purposes?

c. If Specialty's marginal tax rate in year 2 is 25 percent, how should the company account for the refund for tax purposes?

Reference no: EM13314616

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