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11. Dan is beginning his legal practice and is interested in being as tax efficient as possible. He is aware of the accrual and cash
11. Dan is beginning his legal practice and is interested in being as tax efficient as possible. He is aware of the accrual and cash receipts methods of accounting. In determining which method is best which statement is most correct. a. It doesn't matter all income is included in gross income b. The accrual method should be beneficial for him if he will have accounts receivable greater than accounts payable c. Cash will be beneficial since he will have cash to pay the taxes d. Only small taxpayers can use the cash method of accounting 2. Sammy needs dental work done - it will cost $5,000. Sammy has a piece of art that is worth $5,000. Sammy paid $1,000 for the piece of art. Sammy uses the piece of art to pay for the dental services. What is the result of the transaction for Sammy? a. The transaction is not a taxable event to Sammy b. Sammy has income of $5,000 c. The Dentist does not need to report the income d. Sammy has income of $4,000
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