Todd Operates a Business Using the Cash Basis of Accounting

question 118

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:

Richmond

is the capital city of Virginia, United States, known for its historical significance during the Civil War as the capital of the Confederacy.

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Benjamin Franklin Butler, a controversial Union general during the American Civil War, known for his strong enforcement of policies in the territories he commanded.

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Goods that have been imported or exported illegally, not in accordance with laws and regulations.