Question
Gaffney Corporation is a wholesale distributor of auto parts and uses the cash method of accounting. The companys sales have been about $8,775,000 per year
Gaffney Corporation is a wholesale distributor of auto parts and uses the cash method of accounting. The companys sales have been about $8,775,000 per year for the last few years. However, Gaffney has the opportunity to acquire an unincorporated competitor with annual sales of $9,652,500.
Complete the following paragraph regarding the accounting implications of acquiring the competitor.
For the year of acquisition, Gaffney and the acquired business will be treated as a single business. Gaffney must consider the combined gross receipts of both businesses in determining if the average annual gross receipts for the prior three-year period exceed $ ____________statutory threshold. Therefore, Gaffney will likely be able to continue using the cash method for the year of the acquisition.
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