Which of the Following C Corporations Will Be Allowed to Use

question 5

Essay

Which of the following C corporations will be allowed to use the cash method of accounting for 2008? Explain your answers.
a.Cardinal Corporation, which had net profits as follows: $3 million in 2005, $6 million in 2006, and $4 million in 2007.
b.Redbird Corporation, which had gross receipts as follows: $2 million in 2005, $6 million in 2006, and $9 million in 2007.

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Definitions:

Credit Period

The duration of time the buyer is allowed to pay for a purchase after the sale has been made, without incurring any interest.

High-priced Item

An item or asset that has a high cost or value, often relative to similar items in the market.

Low Collateral Value

Low collateral value refers to assets that have declined in worth, offering less security for loans and reducing borrowing capacity.

Credit Scoring

A system used by lenders to evaluate the creditworthiness of potential borrowers, resulting in a score that predicts the likelihood of repayment.