92%(72)66 out of 72 people found this document helpful
This preview shows page 13 - 15 out of 24 pages.
63. B&B Company uses the cash basis for accounting purposes. B&B primarily performs a service; however, it does sell a significant amount of inventory.a. B&B must use the cash basis to account for its inventory*b. Since inventory is an income-producing factor, B&B must use the accrual basis to account for its inventory but may use the cash basis for its other transactionsc. Since inventory is an income-producing factor, B&B must use the accrual basis to account for all of its transactionsd. None of the above64. CKC just received permission from the IRS to change its method of accounting. CKC is uncertain if it now wants to change methods. Since it already has received permission to change,
65. Susan and Tom had the same aggregate taxable income over the last five years. Susan's income was relatively smooth over this period but Tom's income fluctuated greatly over this same time period. Assuming that tax rates have remained reasonably constant over this time period who would experience the greater total tax liability?66. Failure to make a timely accounting election could result in:67. X Company has made sales throughout the year. If prices have been rising constantly throughout the year, then:a. Taxable income will be lower under FIFO*b. Taxable income will be lower under LIFOc. Taxable income will be lower under weighted averaged. Taxable income will be lower under specific identification68. Cash Co. normally takes a physical count of inventory throughout the year. Due to some unexpected circumstances, it is unable to take a physical count at year end. Cash Co. wants to determine its ending inventory using estimates for shrinkage. It may do so if: