In 2016,Swan Company Discovered That It Had for the Past

question 50

Multiple Choice

In 2016,Swan Company discovered that it had for the past 10 years capitalized as a production cost certain expenses that are properly classified as administrative expenses.The total amount of the expense for 2015 was $300,000,$60,000 of the item was included in the ending inventory that year and $240,000 was deducted as cost of goods sold.

• A)The company should amend its 2015 tax return and reduce its income by $240,000.
• B)The company should change its accounting method in 2016,with a $60,000 negative § 481 adjustment which decreases its 2016 taxable income.
• C)The company should change its accounting method in 2016,and increase its 2016 income by $60,000,the amount of the positive § 481 adjustment to income.
• D)The company should change its accounting method in 2016 and recognize a $60,000 negative § 481 adjustment that will be spread equally over 2016-19.
• E)None of the above.

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Definitions:

Alpha Waves

Brain waves detected by EEG that represent a state of relaxation with eyes closed, typically associated with calm wakefulness.

Sleep Spindles

A burst of oscillatory brain activity visible on an EEG that occurs during stage 2 of NREM sleep, thought to play a role in memory consolidation and synaptic plasticity.

Sympathetic Nervous System

A part of the autonomic nervous system that activates the body's flight-or-fight response during stress or danger.

Electrical Impulses

Rapid signals that travel along the nerves or muscle fibers, facilitating communication between different parts of the body or triggering muscle contractions.