Question
unshine Company is a business consulting firm. The company also sells computer equipment to its clients. The sales of equipment account for approximately 35% of
unshine Company is a business consulting firm. The company also sells computer equipment to its clients. The sales of equipment account for approximately 35% of the company's gross receipts. The company has consistently used the cash method to report its income from services and the accrual method to report its income from the sale of inventory. In August of the current year, Sunshine's accountant discovered that as a small business, the company qualifies to use the cash method for all of its activities. The company is a calendar year taxpayer. As of the beginning of the current year, the company had $350,000 of inventory on hand and $180,000 of accounts receivable from the sales of equipment and $78,000 of receivables from the consulting services.
a. Compute the total adjustment due to the change in accounting method.
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