Franklin Company began business in 2012 and has consistently used the cash method to report income from the sale of inventory in income tax returns filed for 2012 through 2016.As a result of an audit by the IRS,Franklin was required to change to the accrual method of accounting beginning with 2017.The net adjustment due to the change is a positive adjustment to income.The adjustment may be spread equally over 2017 and the three following years.

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The Answer of Franklin Company began business in 2012 and has consistently used the cash method to report income from the sale of inventory in income tax returns filed for 2012 through 2016.As a result of an audit by the IRS,Franklin was required to change to the accrual method of accounting beginning with 2017.The net adjustment due to the change is a positive adjustment to income.The adjustment may be spread equally over 2017 and the three following years.

Franklin Company Began Business in 2012 and Has Consistently Used