The Maroon & Orange Gym, Inc., uses the cash method

The Maroon & Orange Gym, Inc., uses the cash 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, 2016, the company sold a one-year membership and a two-year membership. The company should report as gross income from the two contracts:

a. $960 in 2016.

b. $780 in 2017.

c. $180 in 2018.

d. $1,200 in 2016.

e. None of these choices are correct.