Ross Company is a corporation providing medical diagnostic services. Ross has us

ID: 2331570 • Letter: R

Question

Ross Company is a corporation providing medical diagnostic services. Ross

has used the cash method since inception because its gross receipts did not

exceed $25 million. This year its average annual gross receipts for the prior three

years crossed the $25 million 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.

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?

Please support and mark the answer as helpful for other students to acknowledge. Thanks

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