Which of the Following Taxpayers Is Required to Use the Accrual

question 17

Multiple Choice

Which of the following taxpayers is required to use the accrual method of accounting?

• A)A retail business with average annual gross receipts of $800,000.
• B)A medical doctor with average annual gross receipts of $2 million.
• C)An insurance agency with average annual gross receipts of $2 million.
• D)All of the above are required to use the accrual method.
• E)None of the above is required to use the accrual method.

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Definitions:

Moral Hazard

The situation where one party to a transaction can take risks without having to suffer consequences, often because another party bears the cost of those risks.

Mortgage Lender

A financial institution or individual that provides loans to borrowers for the purpose of purchasing real estate, with the property serving as collateral.

Careless Finances

The mismanagement or negligent handling of personal or corporate finances.

Moral Hazard

The risk that one party to a contract can change their behavior to the detriment of another party once the contract has been concluded.