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Copper Corporation, a C corporation, had gross receipts of $26,000,000 in 2017, $27,000,000 in 2018, and...

Copper Corporation, a C corporation, had gross receipts of $26,000,000 in 2017, $27,000,000 in 2018, and $24,000,000 in 2019. Gold Corporation, a personal service corporation (PSC), had gross receipts of $25,000,000 in 2017, $28,000,000 in 2018, and $26,000,000 in 2019. Which of the corporations will be allowed to use the cash method of accounting in 2020?

a.Copper Corporation only.

b.Gold Corporation only.

c.Both Copper Corporation and Gold Corporation.

d.Neither Copper Corporation nor Gold Corporation.

Business   Accounting   
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Answer #1

Answer : Correct option is (b.) Gold Corporation only.

Reason :

A C corporation with the average Gross Receipts less than $25,000,000 is eligible for cash method of accounting.However Personal Service Corporation irrespective of Turnover can apply Cash Method of accounting.
In this case since average gross receipts of Copper Corporation is more than 25 million [(26 + 27 + 24) / 3].Therefore only Gold Corporation, a personal service corporation (PSC) is eligible of Cash Method of accounting.

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