The Taxpayer Has Consistently but Incorrectly Used an Allowance for Bad

question 26

Multiple Choice

The taxpayer has consistently but incorrectly used an allowance for bad debts.At the beginning of the year, the balance in the allowance account is $90,000.

• A)If the IRS examines the taxpayer's return and requires the taxpayer to change accounting methods, the taxpayer will be required to recognize an additional $90,000 of income (one-half in the current year and one- half in the following year) as the adjustment due to the change in accounting methods.
• B)If the taxpayer voluntarily changes methods, the $90,000 adjustment can be spread over the current and three following years.
• C)If the taxpayer voluntarily changes methods, the $90,000 reserve can be used to absorb bad debts until the account balance is zero.
• D)If the IRS examines the taxpayer's return, no adjustment to the reserve account will be required if the balance is consistent with prior bad debt experience.
• E)None of these.

Recognize the influence of economic thought leaders and their theories on the evolution of economic policies.

Understand Keynes's beliefs and contributions to economic theories regarding recessions and government intervention.

Recognize the differences and similarities between classical economists, Keynesians, and monetarists in their approach to economic stability and growth.

Identify the core beliefs of monetarists concerning money supply and economic policy.

---

Definitions:

Sales Dollars

The revenue generated from goods or services sold, expressed in dollars.

Break-Even Point

The production level at which total revenues equal total expenses, resulting in no net loss or gain.

Fixed Costs

Expenses that do not change in relation to the volume of production or sales, such as rent, salaries, and insurance premiums.

Fixed Expenses

Costs that do not change with the level of company activity or production volume, such as rent or salaries.