Unformatted text preview: eipts do not exceed $1,000,000 are exempt
from the requirement.
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Becker CPA Review, PassMaster Questions
Lecture: Regulation 3 Choice "b" is incorrect. A service company with more than $1,000,000 in annual sales will generally not
be required to file income taxes using the accrual basis of accounting because it likely has not met the
test of $5 million in average annual gross receipts for the three-year period ending with the prior tax year.
The facts do not disclose all relevant information; however, remember, the BEST answer is what we are
looking for (and that is choice option "d").
Choice "c" is incorrect. Personal service corporations are treated as individuals for purposes of the rules
for accrual basis tax reporting; therefore, personal service corporations (regardless of the amount of
gross receipts), may use the cash basis of reporting for income tax purposes. CPA-05531 Type1 M/C A-D Corr Ans: B PM#112 R 3-01 79. CPA-0553...
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