The Taxpayer Had Incorrectly Been Using the Cash Method of Accounting

question 67

Multiple Choice

The taxpayer had incorrectly been using the cash method of accounting. For 2014, the company voluntarily changed to the accrual method. The adjustment due to the change in method as calculated at the beginning of 2014 was $120,000 (positive) . The adjustment as calculated as of the end of 2014 was $80,000 (positive) . As a result of the change in method, the company must:

• A) Increase its income for 2014 by $120,000.
• B) Increase its income for 2014 by $80,000.
• C) Increase its income for 2014 by $30,000.
• D) Increase its income for 2014 by $40,000.
• E) None of the above.

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Definitions:

Retraction

The process of drawing back or being drawn back, both in a physical and metaphorical sense.

Epiphyseal Plate

A growth plate in long bones where new bone tissue forms, enabling growth in length.

Diaphysis

The central shaft of a long bone, distinct from the ends of the bone, which are called epiphyses.

Condyle

A rounded protuberance at the end of some bones, forming an articulation with another bone.