The Taxpayer Had Incorrectly Been Using the Cash Method of Accounting.For

question 54

Multiple Choice

The taxpayer had incorrectly been using the cash method of accounting.For 2015,the company voluntarily changed to the accrual method.The adjustment due to the change in method as calculated at the beginning of 2015 was $120,000 (positive) .The adjustment as calculated as of the end of 2015 was $80,000 (positive) .As a result of the change in method,the company must:

• A)Increase its income for 2015 by $120,000.
• B)Increase its income for 2015 by $80,000.
• C)Increase its income for 2015 by $30,000.
• D)Increase its income for 2015 by $40,000.
• E)None of the above.

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Definitions:

Shipping Costs

Expenses associated with the delivery of goods from the manufacturing point to the customer or distribution center.

Variable Manufacturing Cost

Costs that fluctuate with the level of production output, such as raw materials and direct labor.

Fixed Manufacturing Cost

Overheads that do not change with the level of manufacturing output, including salaries of permanent staff and rent.

Annual Impact

The effect or influence that something has over the course of a year, often used in the context of financial, environmental, or social effects.