Greenville Industries Uses the Accrual Basis to Account for All

question 36

Multiple Choice

Greenville Industries uses the accrual basis to account for all sales transactions. Sales for 2018 total $500,000. Included in this amount is $75,000 in receivables from sales on installment. Installment sales are considered revenue for book purposes, but not for tax purposes. Operating expenses total $140,000 and are treated the same for book and tax purposes. Assuming a 35% tax rate, what is Greenville's income tax payable?

• A) $99,750
• B) $126,000
• C) $148,750
• D) $175,000

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Definitions:

Housing Bubble

A temporary condition characterized by an unusual increase in housing prices fueled by demand, speculation, and exuberant spending to the levels that income levels do not support.

Demand Curve

A graph showing the relationship between the price of a good and the quantity demanded by consumers, usually downward sloping to the right indicating inverse relationship between price and quantity demanded.

Normal Good

A good for which demand increases as the income of the consumer increases, and vice versa.

Income Increase

Refers to a rise in the amount of money earned by an individual or entity, which can affect purchasing power and economic status.