The taxpayer had incorrectly been using the cash method of accounting.For 2014,the company voluntarily changed to the accrual method.The adjustment due to the change in method as calculated at the beginning of 2014 was $120,000 (positive).The adjustment as calculated as of the end of 2014 was $80,000 (positive).As a result of the change in method,the company must:
A)Increase its income for 2014 by $120,000.
B)Increase its income for 2014 by $80,000.
C)Increase its income for 2014 by $30,000.
D)Increase its income for 2014 by $40,000.
E)None of these.

Question

Quizplus · Accepted Answer

The adjustment is calculated at the beginning of the year of the change and is amortized equally over the year of the change and three subsequent years.$120,000/4 = $30,000.

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