Lily is a cash method taxpayer who changes to the accrual, Accounting Basics

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Lily is a cash method taxpayer who changes to the accrual

Problem

Lily is a cash method taxpayer who changes to the accrual method in 2016. Lily's income computed under the accrual method for 2016 is $50,000. Her books show the following balances:

	12/31/2015	12/31/2016
A/R	$20,000	$33,500
A/P	$7,500	$4,200

a. What adjustment is necessary to Lily's income?
b. How should Lily report the adjustment?

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Accounting Basics: Lily is a cash method taxpayer who changes to the accrual

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Accounting Basics: Lily is a cash method taxpayer who changes to the accrual

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