TQK,LLC, provides consulting services and was formed on 1/31/X5. Aaron and ABC, Incorporated, each hold a 50percent capital and profits interest in TQK. If TQK averaged $29,000,000 in annual gross receipts over the last three years, what accounting method can TQK use for X9?
A)Accrual method
B)Cash method
C)Hybrid method
D)Accrual method or cash method

Question

Quizplus · Accepted Answer

TQK meets the average annual gross receipts test for the past three years, which allows them to use the accrual method of accounting. The cash method is only available to businesses with under $25 million in average annual gross receipts over the past three years, and the hybrid method is not a recognized accounting method by the IRS. Therefore, the best choice for TQK is the accrual method.

TQK,LLC, Provides Consulting Services and Was Formed on 1/31/X5