Franklin Company Began Business in 2012 and Has Consistently Used

question 57

True/False

Franklin Company began business in 2012 and has consistently used the cash method to report income from the sale of inventory in income tax returns filed for 2012 through 2016.As a result of an audit by the IRS,Franklin was required to change to the accrual method of accounting beginning with 2017.The net adjustment due to the change is a positive adjustment to income.The adjustment may be spread equally over 2017 and the three following years.

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Definitions:

Net Taxes

The total amount of taxes collected by the government minus any transfer payments and subsidies.

GDP

Gross Domestic Product, a measure of the economic performance of a country, evaluating the total value of all goods and services produced over a specific time period.

Government Purchases

Expenditures by government agencies on goods and services that directly satisfy public consumption or are invested in public infrastructure.

Full Employment

An economic condition where every available workforce is employed in the most effective way achievable.