The taxpayer had incorrectly been using the cash method of accounting.For 2019, the company voluntarily changed to the accrual method.The adjustment due to the change in method as calculated at the beginning of 2019 was $120,000 (positive).The adjustment as calculated as of the end of 2019 was $80,000 (positive).As a result of the change in method, the company must:
A)Increase its income for 2019 by $120,000.
B)Increase its income for 2019 by $80,000.
C)Increase its income for 2019 by $30,000.
D)Increase its income for 2019 by $40,000.
E)None of these.

Question

Quizplus · Accepted Answer

The adjustment is spread over four years. The difference between the beginning and end of 2019 adjustments is $40,000 ($120,000 - $80,000), but since the adjustment is spread over four years, the income increase for 2019 is $30,000 ($120,000/4).

The Taxpayer Had Incorrectly Been Using the Cash Method of Accounting.For