The Taxpayer Had Incorrectly Been Using the Cash Method of Accounting

question 18

Multiple Choice

The taxpayer had incorrectly been using the cash method of accounting. For 2012, the company voluntarily changed to the accrual method. The adjustment due to the change in method as calculated at the beginning of 2012 was $120,000 (positive) . The adjustment as calculated as of the end of 2012 was $80,000 (positive) .As a result of the change in method, the company must:

• A)Increase its income for 2012 by $120,000.
• B)Increase its income for 2012 by $80,000.
• C)Increase its income for 2012 by $30,000.
• D)Increase its income for 2012 by $40,000.
• E)None of the above.

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Definitions:

Inclusive Range

The difference between the highest and lowest values in a dataset, including both of those values.

Formula

A mathematical expression or rule expressed in symbols, representing the relationship between variables.

Summation

The process of adding together a sequence of numbers or other quantities to find their total.

Standard Deviation

A measure of the amount of variation or dispersion in a set of values, indicating how spread out the values are.