Ross Company is a corporation providing medical diagnostic services. Ross has used the cash method since inception

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 cliange 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?

Accounts Payable
Accounts payable (AP) are bills to be paid as part of the normal course of business.This is a standard accounting term, one of the most common liabilities, which normally appears in the balance sheet listing of liabilities. Businesses receive... Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...

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