Squawk Box Company (Squawk Box), a C corporation, started business in 2008. Squawk Box used the cash method for financial and tax reporting purposes for years 2008 through 2015. During years 2008 through 2012, annual gross receipts did not exceed $1,000,000; however in 2013 annual gross receipts were $5,250,000; in 2014 they were $6,500,000 and in 2015 they were $7,750,000. (See Table 1 below) If determined using the accrual method, Squawk Box's books at the start of tax year 2015 would show the following: Accounts Receivable, $250,000; Accounts Payable, $115,000; and Inventory, $650,000. In 2016 Squawk Box has taxable income of $7,775,000 determined using the accrual basis of accounting.

Table 1

Year

Gross Receipts

2008

500,000

2009

550,000

2010

625,000

2011

700,000

2012

1,000,000

2013

5,250,000

2014

6,500,000

2015

7,750,000

2016

7,775,000

a.Determine whether Squawk Box qualifies to make this change under the automatic consent procedures of Revenue Procedure 2015-13 or should use Revenue Procedure 2011-14.

b.Determine whether the change in Squawk Box's accounting method will require an adjustment of income under IRC 481 and determine the timing of the recognition of this adjustment.

c.Prepare an excel worksheet calculating any IRC 481 adjustment and determining the total taxable income that Taxpayer will recognize.

d.Squawk is located at 751 Cramer Street, Hancock, MA 01112. Squawk's EIN is 01-2345678.Prepare Form 3115, referring to forms and instructions available athttp://www.irs.gov

e.Draft a tax memorandum to Martin Bear, Partner at Bull & Bear, with the results of your research and suggestions.Attach the documents you have prepared.The memorandum itself should be no longer than three single-spaced pages in length.