Gaffney Corporation is a wholesale distributor of auto parts and uses the cash method of accounting. The company's sales have been about $20,000,000 per year for the last few years. However, Gaffney has the opportunity to acquire an unincorporated competitor with annual sales of $10,000,000. Complete the following paragraph regarding the accounting implications of acquiring the competitor. V. Gaffney must For the year of acquisition, Gaffney and the acquired business will be treated as a single business consider the combined gross receipts of both businesses in determining if the average annual gross receipts for the prior three-year period exceed $ 26,000,000 X statutory threshold. Therefore, Gaffney will likely be required to change to the accrual method for the year of the acquisition.

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Exercise 16-26 (LO. 2)
Gaffney Corporation is a wholesale distributor of auto parts and uses the cash method of accounting. The company's sales have been
about $20,000,000 per year for the last few years. However, Gaffney has the opportunity to acquire an unincorporated competitor with
annual sales of $10,000,000.
Complete the following paragraph regarding the accounting implications of acquiring the competitor.
Gaffney must
For the year of acquisition, Gaffney and the acquired business will be treated as a single business
consider the combined gross receipts of both businesses in determining if the average annual gross receipts for the prior three-year
period exceed $ 26,000,000 X statutory threshold. Therefore, Gaffney will likely be
required to change to the accrual method
for the year of the acquisition.
Transcribed Image Text:Exercise 16-26 (LO. 2) Gaffney Corporation is a wholesale distributor of auto parts and uses the cash method of accounting. The company's sales have been about $20,000,000 per year for the last few years. However, Gaffney has the opportunity to acquire an unincorporated competitor with annual sales of $10,000,000. Complete the following paragraph regarding the accounting implications of acquiring the competitor. Gaffney must For the year of acquisition, Gaffney and the acquired business will be treated as a single business consider the combined gross receipts of both businesses in determining if the average annual gross receipts for the prior three-year period exceed $ 26,000,000 X statutory threshold. Therefore, Gaffney will likely be required to change to the accrual method for the year of the acquisition.
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