Karen, an accrual basis taxpayer, sold goods in December 2019 for $20,000. The customer was unable to pay cash. So the customer gave Karen a note for $20,000 that was payable in April 2020. The note bore interest at the Federal rate. The fair market value of the note at the end of 2019 was $18,000. Karen collected $20,500 from the customer in April 2020, $20,000 principal plus $500 interest. Under the accrual method, Karen must recognize income of:

You are the owner of a local honda dealership. unlike other dealerships in the area, you take pride in your “no haggle” sales policy. last year, your dealership earned record profits of $1.5 million. however, according to the local chamber of commerce, your earnings were 10 percent less than either of your competitors. in your market, the price elasticity of demand for midsized honda automobiles is 4.5. in each of the last five years, your dealership has sold more midsized automobiles than any other honda dealership in the nation. this entitled your dealership to an additional 30 percent off the manufacturer’s suggested retail price (msrp) in each year. taking this into account, your marginal cost of a midsized automobile is $11,000. what price should you charge for a midsized automobile if you expect to maintain your record sales?