Todd Operates a Business Using the Cash Basis of Accounting

question 7

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 the 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:

Slave System

An economic and social system based on the ownership, purchase, and forced labor of human beings for the benefit of their owners.

Freed Blacks

African American individuals who were emancipated from slavery, especially during and after the Civil War in the United States.

Runaway Slaves

Enslaved people who escaped from their enslavers in an attempt to gain freedom, often facing great risks and seeking safe haven through networks like the Underground Railroad.

Wilmot Proviso

A proposed amendment to a bill in the U.S. Congress in 1846 aiming to ban slavery in territory acquired from Mexico.