Which of the following C corporations will be allowed to use the cash method of accounting...
Which of the following C corporations will be allowed to use the cash method of accounting for 2018? Explain your answers.
a. Jade Corporation, which had a gross receipts of $25.3 million in 2015, $24.1 million in 2016, and $25 million in 2017.
b. Lime Coporation a personal service corporation, which had gross receipts of $25.8 million in 2015, $25.2 million in 2016, and $24.4 million in 2017.
Homework Answers
Normally the following tax payers may use the cash method of accounting:
Such as :
Individuals, Qualified personal service corporations
Custom manfacturers, C coporations with subject to conditions
THe internal revenue service issues the guidance note that,
C corporartions To use cash method of accounting, it must satisfy the following condition :
Three years average gross receipts could not exceed $ 25 million.
a) 25.3+24.1+25/3 = $ 24.8 million couldnt exceed the limit.
Therefore, jade corporation satisfies the gross receipt exception and can follow cash method of accounting.
Normally a psc may follow cash method of accounting without regarding its gross receipts.
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Recently the corporation has had several unusual accounting
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You are the CPA for Pronghorn and have been asked to examine the
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