Why would December 31 be an inappropriate year-end for a ski resort?
2. In the case of a profitable S corporation, what would be the advantage to using a tax year ending January 31 if this was permissible?
4. Pale Motel, Inc., was a C corporation using a fiscal year ending April 30 for tax purposes for all tax years through April 30, 20X7. In May 20X7, the corporation made an S election. What are the implications of the election for Pale’s tax year?
6. Compare the cash basis and accrual basis of accounting as applied to the following:
Prepaid rent income
Prepaid interest expense
7. Edgar uses the cash method to report the income from his software consulting business. A large publicly held corporation has offered to invest in Edgar’s business as a limited partner. What tax accounting complications would be created if Edgar and the corporation become partners?
11. The Eagle Corporation builds yachts. All vessels are practically identical and sell for more than $2 million. Production does not begin until the company has a contract to sell the vessel. The company has recently changed its production techniques to reduce the time for producing a yacht from 15 months to 9 months. What are the accounting method implications of the change?
14. What accounting method (cash or accrual) would you recommend for the following businesses?
An incorporated medical practice with annual gross receipts of $12
A hardware store with annual gross receipts of less than $1
A grocery store with annual gross receipts of $4.5 million.