Which of the Following Must Use the Accrual Method of Accounting

question 62

Multiple Choice

Which of the following must use the accrual method of accounting? I.
A property management company, operating as a C corporation, with average annual gross receipts of $50 million.
II)
An incorporated law firm with average annual gross receipts of $6 million.
III)
An unincorporated grocery store with average annual gross receipts of $1,200,000.

• A)All of the above must use the accrual method.
• B)None of the above must use the accrual method.
• C)Only I and II must use the accrual method.
• D)Only I and III must use the accrual method.
• E)Only III must use the accrual method.

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Definitions:

Socially Optimal

A condition or point at which the total benefits to society are maximized, often considered in the context of production or distribution of goods and services.

Negative Externality

A cost that affects a party who did not choose to incur that cost, often seen in environmental pollution where the public bears the cost not reflected in the market price.

Lawn Mowing

Lawn mowing refers to the act of cutting or trimming the grass in a lawn to maintain its appearance and health, often performed as a routine landscaping activity.

External Costs

Costs of a transaction that affect people other than the buyer or seller and are not reflected in the prices.