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In 2017, Bust Company requested and received permission from the IRS to switch its accounting method from the cash method to the accrual method. Taxable income in 2017 (computed under the accrual basis) was $110,000. At the end of 2017, Bust had accounts receivable of $32,000; accounts payable of $27,000; and merchandise inventory of $10,000. Determine Bust Company's taxable income after all (if any) adjustments. Is any relief available to Bust Company

Sagot :

abiolataiwo2015

Answer:

$105,000

Explanation:

Calculation to determine Bust Company's taxable income after all adjustment

Using this formula

Taxable income after Adjustment=Taxable income in 2017-(accounts receivable-accounts payable )

Let plug in the formula

Taxable income after Adjustment=$110,000-($32,000-$27,000)

Taxable income after Adjustment=$110,000-$5,000

Taxable income after Adjustment=$105,000

Therefore Bust Company's taxable income after all adjustment is $105,000

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