Andrew Owns 100% of the Stock of Crow's Farm Inc

question 12

Multiple Choice

Andrew owns 100% of the stock of Crow's Farm Inc., an S corporation, that raises cattle and corn. The farm's annual gross receipts have never exceeded $3 million and the farm is not considered a tax shelter.

• A)The farm must report its sales and cost of goods sold by the accrual method because inventories are material to the business.
• B)The income from the farm may be reported by the cash method.
• C)The income from the sales of cattle may be reported by the cash method, but the income from the sales of corn must be reported by the accrual method.
• D)The income from the sales of corn may be reported by the cash method, but the income from cattle sales must be reported by the accrual method.
• E)None of the above.