A Partnership May Use the Cash Method Despite Having a Corporate

question 18

Multiple Choice

A partnership may use the cash method despite having a corporate partner when the partnership's average gross receipts for the prior three taxable years don't exceed _________.

• A) $500,000.
• B) $1,000,000.
• C) $5,000,000.
• D) Partnerships may never use the cash method if they have corporate partners.

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Definitions:

Absorption Costing

A cost accounting procedure that comprises adding up all expenses involved in manufacturing—direct materials, direct labor, and manufacturing overhead, both fixed and variable—to the cost of the product.

Ending Inventory

The total value of all inventory, including raw materials, work-in-progress, and finished goods, at the conclusion of an accounting period.

Variable Costing

An accounting method that only assigns variable costs to inventory, treating fixed costs as period costs.

Variable Costing

A costing method where only variable production costs are included in product costs, with fixed overhead excluded from inventory valuation.