Which of the following must use the accrual method of accounting? a.All of these

Question

Which of the following must use the accrual method of accounting?

a.All of these choices must use the accrual method.

b.None of these choices must use the accrual method.

c.Only I and III must use the accrual method.

d.Only I and II must use the accrual method.

e.Only III must use the accrual method.

I. A property management company, operating as a C corporation, with average annual gross receipts of $50 million. II. An incorporated law firm with average annual gross receipts of $6 million. III. An unincorporated grocery store with average annual gross receipts of $1,200,000.

Explanation / Answer

SOLUTION

Correct option is - All of these choices must use the accrual method.

The incorporated property management company must use the accrual method.

The incorporated law firm is not required to use the accrual method under the small business exemption (average annual gross receipts are $5,000,000 or less), but in the given case gross receipts is $6millions, so it must use accrual method.

The grocery store can use the cash method under the small business exception (average annual gross receipts of $1,000,000 or less), but in the given case gross receipts is $1,200,000 , so it must use accrual method.

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