Franklin Company Began Business in 2011 and Has Consistently Used

question 16

True/False

Franklin Company began business in 2011 and has consistently used the cash method to report income from the sale of inventory in income tax returns filed for 2011 through 2015.As a result of an audit by the IRS,Franklin was required to change to the accrual method of accounting beginning with 2016.The net adjustment due to the change is a positive adjustment to income.The adjustment may be spread equally over 2016 and the three following years.

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Definitions:

Reckless Ignorance

A state of disregarding or showing indifferent concern towards the consequences of one’s actions, often leading to harm or risks.

Embezzled Funds

Money that is dishonestly taken from an employer or organization by someone in a position of trust, typically for personal use.

Unqualified Opinion

An auditor's report that the financial statements of an entity present fairly its affairs in all material respects according to the applicable financial reporting framework.

CPA

Certified Public Accountant, a professional designation given to accountants who pass a licensing examination in accounting.