Which of the Following Statements Is Always True Regarding Accounting

question 108

Multiple Choice

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

• A) If a partnership is a tax shelter, it can use the cash method of accounting.
• B) If a non-tax-shelter partnership had "average annual gross receipts" of less than $25 million in all prior years, it can use the cash method.
• C) If a partnership has a partner that is a personal service corporation, it cannot use the cash method.
• D) If a partnership has a partner that is a C corporation, it cannot use the cash method.
• E) All of the above statements are always true.

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Definitions:

Cash Payback Period

The time it takes for an investment to generate an amount of cash inflows equal to the initial cost of the investment.

Net Cash Flows

The difference between cash inflows and cash outflows within a specified period, reflecting the total amount of cash being transferred into and out of a business.

Estimated Cost

A projection or approximation of the cost associated with a particular project, product, or activity.

Cash Payback Period

The time it takes for an investment to generate enough cash flow to recoup the initial outlay.