Question

In 2020, Wimer Corporation, a service business, no longer qualifies as a small business. Thus, it must change from the cash to the accrual method starting with its 2020 tax year.. At the beginning of 2020, Wimer had accounts receivable of $575,000. Also, Wimer had accounts payable of $345,000. Determine the adjustment to income due to the change in accounting method and the amount that is allocated to 2020.

Answer 1

Answer:

$230,000

Explanation:

Given:

Account receivable = $575,000

Accounts payable = $345,000

Note: If we deduct account receivable from accounts payable, we will get Net change in Income.

Computation:

Net change in Income = Account receivable - Accounts payable

 Net change in Income = $575,000 - $345,000

 Net change in Income = $230,000