【正文】 S must use a tax year ending September 30th. d. Gamp。S must use a tax year ending June 30th. b. Gamp。S Partnership, which was formed on July 1, 2020. Gold uses a calendar tax year, and Silver’s tax year ends September 30. Gamp。 481 adjustment and $7,500 must be added to taxable ine for each year 2020, 2020, 2020, and 2020. Accounting Periods and Methods 169 ANS: T The positive 167。 481 adjustment. Since the change in accounting method is involuntary, a positive adjustment must be included in gross ine in the year of the change in accounting method. So the amount of the 167。 1341, Ted is permitted to reduce the 2020 tax liability by the amount of the tax paid in 2020 on an amount that was subsequently determined to not be his ine. PTS: 1 DIF: 1 REF: p. 1610 OBJ: 2 NAT: AICPA FNMeasurement | AACSB Analytic MSC: 5 min 15. A disadvantage to using the accrual method of accounting, as pared to the cash method, is that under the accrual method the ine may be recognized before it is actually collected. ANS: T Under the accrual method, the ine must be recognized when the taxpayer has the right to receive the ine, whether or not the ine has actually been received. PTS: 1 DIF: 1 REF: p. 1613 OBJ: 2 NAT: AICPA FNMeasurement | AACSB Analytic MSC: 2 min 16. A new calendar year, cash basis corporation paid $12,000 for a 12month license on June 30, 2020. The corporation can deduct only $6,000 for the calendar year 2020. ANS: F Under the oneyear rule for prepaid expenses for cash basis taxpayers, the entire $12,000 can be deducted in the year paid. PTS: 1 DIF: 1 REF: p. 1612 OBJ: 2 NAT: AICPA FNMeasurement | AACSB Analytic MSC: 2 min 168 2020 Comprehensive Volume/Test Bank 17. Alice, Inc., an S corporation, operates a retail clothing store and also owns rental property. The sales from the clothing store must be reported by the accrual basis, but the rental ine may be reported by the cash method, unless Alice previously elected the accrual method for rents. ANS: T PTS: 1 DIF: 1 REF: p. 1611 OBJ: 2 NAT: AICPA FNReporting | AACSB Analytic MSC: 2 min 18. If it were not for the allevents requirement, a taxpayer would be permitted to match revenue from a sale with the estimated future costs of servicing goods under a warranty. ANS: F Such an accrual would violate both the allevents and economic performance requirements. PTS: 1 DIF: 1 REF: p. 1613 | p. 1614 OBJ: 2 NAT: AICPA FNReporting | AACSB Analytic MSC: 2 min 19. A C corporation provides office janitorial services to various businesses. The corporation has average annual gross receipts of $2,500,000. The corporation can use the cash method of accounting. ANS: T The C Corporation is providing services, and inventories are not an ine producing factor. Furthermore, the corporation’s average annual gross receipts are less than $5 million. Therefore, the corporation can use the cash method. PTS: 1 DIF: 1 REF: p. 1612 OBJ: 2 NAT: AICPA FNReporting | AACSB Analytic MSC: 2 min 20. Franklin Company began business in 2020 and has consistently used the cash method to report ine from the sale of inventory in ine tax returns filed for 2020 through 2020. As a result of an audit by the IRS, Franklin was required to change to the accrual method of accounting beginning with 2020. The accounts receivable and inventory on hand at the end of 2020 are treated as a positive adjustment to ine and the accounts payable for inventory at the end of 2020 is a negative adjustment to ine. These adjustments result from changing accounting methods and must be included in the 2020 taxable ine. ANS: T The accounts receivable balance and inventory at the end of 2020 are positive 167。 G Partnership. Red Corporation’s tax year ends September 30th, and Green Corporation is a calendar year taxpayer. R amp。 481 adjustment Unchanged 21 22 Installment method: recognized gain Unchanged 22 23 Installment method: recovery of capital Unchanged 23 24 Installment method: interest on deferred taxes New 25 Capitalization of interest Unchanged 25 162 2020 Comprehensive Volume/Test Bank Status: Q/P Question/ Present in Prior Problem Topic Edition Edition 26 Percentage of pletion method versus pleted Unchanged 26 contract method: eligibility 27 Percentage of pletion method: de minimis rule Unchanged 27 MULTIPLE CHOICE 1 Tax year: 5253 weeks Unchanged 1 2 Tax year: partnership Unchanged 2 3 Tax year: partnership and least aggregate deferral Unchanged 3 4 Tax year: entity form New 5 Tax year: selection Unchanged 5 6 Tax year: personal service corporation Unchanged 6 7 Tax year: annualization Unchanged 7 8 Restoration of amounts received under a Unchanged 8 claim of right 9 Accrual method: who must use? New 10 Accounting method: required method Unchanged 10 11 Accounting method: required method Unchanged 12 Accounting method: required method Unchanged 12 13 Accounting method: farming Unchanged 13 14 Accrual method: allevents test Unchanged 14 15 Accrual method: allevents test and economic New performance test 16 Accrual basis: economic performance and all events Unchanged 16 17 Economic performance: recurring items New 18 Economic performance: matching Unchanged 18 19 Economic performance and all events tests Unchanged 19 20 Accrual method: reserves New 21 Accounting method: change New 22 Accounting method: change Unchanged 22 23 Accounting method: change Unchanged 23 24 Accounting method: change Unchanged 24 25 Accounting method: change Modified 25 26 Installment method: eligibility Unchanged 26 27 Installment method: eligibility Unchanged 27 28 Installment method: eligibility Unchanged 28 29 Installment method: contract price and depreciati