Gaffney Corporation is a wholesale distributor of auto parts and uses the cash method of accounting. The company's sales have been about $11,175,000 per year for the last few years. However, Gaffney has the opportunity to acquire an unincorporated competitor with annual sales of $12,292,500. 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 EV.Gaffney must V consider the combined gross receipts of both businesses in determining if the average annual gross receipts for the prior three-year perlod EV for exceed $ statutory threshold. Therefore, Gaffney will likely be able to continue using the cash method the year of the acquisition.
Gaffney Corporation is a wholesale distributor of auto parts and uses the cash method of accounting. The company's sales have been about $11,175,000 per year for the last few years. However, Gaffney has the opportunity to acquire an unincorporated competitor with annual sales of $12,292,500. 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 EV.Gaffney must V consider the combined gross receipts of both businesses in determining if the average annual gross receipts for the prior three-year perlod EV for exceed $ statutory threshold. Therefore, Gaffney will likely be able to continue using the cash method the year of the acquisition.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Gaffney Corporation is a wholesale distributor of auto parts and uses the cash method of accounting. The company's sales have been about
$11,175,000 per year for the last few years. However, Gaffney has the opportunity to acquire an unincorporated competitor with annual
sales of $12,292,500.
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 o single business
consider the combined gross receipts of both businesses in determining if the average annual gross receipts for the prior three-year period
EV.Gaffney must Y
exceed $
statutory threshold. Therefore, Gaffney will likely be able to continue using the cash method
EV for
the year of the acquisition.
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