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

Exercise 80

Erin is considering switching her business from the cash method to the accrual method at the beginning of next year (year 1).Determine the amount and timing of her §481 adjustment assuming the IRS grants Erin's request in the following alternative scenarios.a.At the end of year 0/beginning of year 1, Erin's business has $15,000 of accounts receivables and $18,000 of accounts payables that have not been recorded for tax purposes.b.At the end of year 0/beginning of year 1, Erin's business reports $25,000 of accounts receivables and $9,000 of accounts payables that have not been recorded for tax purposes.