The taxpayer had incorrectly been using the cash method of accounting.For 2015,the company voluntarily changed to the accrual method.The adjustment due to the change in method as calculated at the beginning of 2015 was $120,000 (positive).The adjustment as calculated as of the end of 2015 was $80,000 (positive).As a result of the change in method,the company must:
A)Increase its income for 2015 by $120,000.
B)Increase its income for 2015 by $80,000.
C)Increase its income for 2015 by $30,000.
D)Increase its income for 2015 by $40,000.
E)None of the above.

Question

Quizplus · Accepted Answer

The adjustment is the difference between the beginning and end of 2015, which is $120,000 - $80,000 = $40,000. However, the question asks for the increase in income, which is the change in the adjustment amount, $120,000 - $80,000 = $40,000.

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