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:

Equity Funds

Investment funds that primarily invest in stocks, aiming to provide returns through capital gains or dividends.

Personal Funds

Money that individuals have saved or accumulated, which can be used for investments, starting a business, or other personal uses.

Venture Capital Firms

Companies that invest in start-ups and small businesses with high growth potential in exchange for equity, or partial ownership, of the company.

Public Offerings

Refers to the process by which a private company offers shares to the public in a new stock issuance, allowing it to raise capital from public investors.