McGraw-Hill's Taxation of Business Entities 3rd Edition by Connie Weaver, Brian Spilker, Edmund Outslay, John Robinson, Ronald Worsham, Benjamin Ayers, John Barrick

Exercise 21

Nicole's business uses the accrual method of accounting and accounts for inventory with specific identification. In year 0, Nicole received a $4,500 payment with an order for inventory to be delivered to the client early next year. Nicole has the inventory ready for delivery at the end of year 0 (she purchased the inventory in year 0 for $2,300).
a. When does Nicole recognize the $2,200 of gross profit ($4,500 revenue minus $2,300 cost of the inventory) if she uses the full-inclusion method
b. When does Nicole recognize the $2,200 of gross profit from the inventory sale if she if she uses the deferral method
c. How would Nicole account for the inventory-related transactions if she uses the cash method of accounting and her annual sales are usually less than $100,000
d. How would Nicole account for the inventory-related transactions if she uses the cash method of accounting and her annual sales are usually over $2,000,000 per year