Which of the Following Statements Is True Regarding Accounting Methods

question 19

Multiple Choice

Which of the following statements is true regarding accounting methods available to a partnership?

• A) If a partnership is a tax shelter, it cannot use the accrual method of accounting.
• B) If a partnership has a personal service corporation as a partner, it cannot use the cash method.
• C) If a partnership has a partner that is a C corporation, it cannot use the cash method.
• D) If a partnership has a partner that is a C corporation, it must use the cash method.
• E) All of the above statements are false.

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Definitions:

Market Equilibrium

The state in a market where the quantity demanded equals the quantity supplied, leading to a stable price level for goods or services.

Total Surplus

The sum of consumer surplus and producer surplus, representing the total benefit to society from the production and sale of a good or service.

External Benefits

Positive effects of a production or consumption activity on third parties not directly involved in the transaction, leading to social or economic benefits.

Total Surplus

The sum of consumer and producer surplus, representing the total net benefit to society from a market transaction.