Mike Inc. is switching from a cash to an accrual method for tax purposes effective 1/1/X2. Mike filed for approval with the IRS and was granted permission to change its method. As of 12/31/X1 Mike Inc. had the following information: Receivables: Accounts receivable from sales to customers $ 300,000 Interest receivable from municipal bonds 100,000 Accounts payable and accrued expenses: Accounts payable from ordinary & necessary Business expenses $ 125,000 Accrued expenses pertaining to tax exempt Income 25,000 What is the least amount of taxable income will Mike Inc recognize in 20X2 from switching from the cash to accrual method? a. $ 0 b. $ 37,500 c. $ 43,750 d. $ 150,000 e. $ 175,000
Mike Inc. is switching from a cash to an accrual method for tax purposes effective 1/1/X2. Mike filed for approval with the IRS and was granted permission to change its method. As of 12/31/X1 Mike Inc. had the following information:
Receivables:
Interest receivable from municipal bonds 100,000
Accounts payable and accrued expenses:
Accounts payable from ordinary & necessary Business expenses $ 125,000
Accrued expenses pertaining to tax exempt
Income 25,000
What is the least amount of taxable income will Mike Inc recognize in 20X2 from switching from the cash to accrual method?
a. $ 0
b. $ 37,500
c. $ 43,750
d. $ 150,000
e. $ 175,000
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