Todd Operates a Business Using the Cash Basis of Accounting

question 7

Multiple Choice

Todd operates a business using the cash basis of accounting. At the end of last year, Todd was granted permission to switch his sales on account to the accrual method. Last year Todd made $420,000 of sales on account and $64,000 was uncollected at the end of the year. What is the Todd's §481 adjustment for this year?

• A) increase income by $420,000
• B) increase income by $16,000
• C) increase expenses by $64,000
• D) increase expenses by $420,000
• E) Todd has no §481 adjustment this year.

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Definitions:

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