Todd Operates a Business Using the Cash Basis of Accounting

question 40

Multiple Choice

Todd operates a business using the cash basis of accounting. At the end of last year, Todd was granted permission to switch his sales on account to the accrual method. Last year Todd made $420,000 of sales on account and $64,000 was uncollected at the end of the year. What is Todd's §481 adjustment for this year?

• A) Increase income by $420,000
• B) Increase income by $16,000
• C) Increase expenses by $64,000
• D) Increase expenses by $420,000
• E) Todd has no §481 adjustment this year.

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Definitions:

Collaborative Care Planning

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Critical Thinking

The objective analysis and evaluation of an issue in order to form a judgment.

Reasoning Skills

The ability to think logically, make decisions, and solve problems effectively.

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A system that ranks foods on a scale from 0 to 100 based on how much they raise blood sugar levels after eating.