Exercise $18-26($Algorithmic$)($LO$.2)$

Gaffney Corporation is a wholesale distributor of auto parts and uses the cash method of accounting. The company's sales have been about $$16,800,000$ per year for the last few years.

However, Gaffney has the opportunity to acquire an unincorporated competitor with annual sales of $$18,480,000.$

Complete the following paragraph regarding the accounting implications of acquiring the competitor.

For the year of acquisition, Gaffney and the acquired business will be treated as$$ a single business. Gaffney$$ must $$consider the combined gross receipts of both businesses in determining if the average annual

gross receipts for the prior three$-$year period exceed $ $$statutory threshold. Therefore, Gaffney will likely be$$ required to change to the accrual method $$for the year of the acquisition.