WFO Corporation has gross receipts according to the following schedule: $\begin{array}{ll}
\text { Year 1 } & \$ 22 \text { million } \
\text { Year 2 } & \$ 24 \text { million } \
\text { Year 3 } & \$ 26 \text { million } \
\text { Year 4 } & \$ 24.5 \text { million } \
\text { Year 5 } & \$ 25 \text { million } \
\text { Year 6 } & \$ 27 \text { million }
\end{array}$ If WFO began business as a cash-method corporation in Year 1,in which year would it have first been required to use the accrual method?

Question

Quizplus · Accepted Answer

A corporation must switch to the accrual method if its average annual gross receipts exceed $25 million over the prior three years. In Year 6, the average of Years 3, 4, and 5 is $25.1667 million, exceeding the threshold.

WFO Corporation Has Gross Receipts According to the Following Schedule