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Compute and explain the adjustment to taxable income

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Reference no: EM132660646

Problem - Ross Company is a C corporation providing property management services. Ross has used the cash method since inception because its gross receipts did not exceed $26,000,000. This year its average annual gross receipts for the prior three years crossed the $26,000,000 mark, requiring Ross to change from the cash method to the accrual method (per § 448). At the end of its prior year, Ross had accounts receivable of $850,000 and accounts payable of $540,000.

Required -

a. Compute and explain the adjustment to taxable income that Ross must make due to the change in accounting method.

b. When must Ross include this adjustment in its income?

Reference no: EM132660646

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