WFO Corporation has gross receipts according to the following schedule: 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

WFO Corporation has gross receipts according to the following schedule:  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?

Quizplus · Accepted Answer

Corporations with $25 million or less in annual average gross receipts can use the cash method of accounting for tax purposes. Corporations that have not been in existence for at least three years can compute average annual gross receipts over the years they have been in existence. The three years preceding Year 6 have annual average gross receipts of $25.167 million.

WFO Corporation Has Gross Receipts According to the Following Schedule