Gaffney Corporation is a wholesale distributor of auto parts and uses the cash method of accounting. The company's sales have been about $20,000,000 per year for the last few years. However, Gaffney has the opportunity to acquire an unincorporated competitor with annual sales of $10,000,000. Complete the following paragraph regarding the accounting implications of acquiring the competitor. V. Gaffney must For the year of acquisition, Gaffney and the acquired business will be treated as a single business consider the combined gross receipts of both businesses in determining if the average annual gross receipts for the prior three-year period exceed $ 26,000,000 X statutory threshold. Therefore, Gaffney will likely be required to change to the accrual method for the year of the acquisition.
Gaffney Corporation is a wholesale distributor of auto parts and uses the cash method of accounting. The company's sales have been about $20,000,000 per year for the last few years. However, Gaffney has the opportunity to acquire an unincorporated competitor with annual sales of $10,000,000. Complete the following paragraph regarding the accounting implications of acquiring the competitor. V. Gaffney must For the year of acquisition, Gaffney and the acquired business will be treated as a single business consider the combined gross receipts of both businesses in determining if the average annual gross receipts for the prior three-year period exceed $ 26,000,000 X statutory threshold. Therefore, Gaffney will likely be required to change to the accrual method for the year of the acquisition.
Chapter18: Accounting Periods And Methods
Section: Chapter Questions
Problem 28CE
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