Final answer:
Corporations may use the cash accounting method if they have average gross receipts of $26 million or less over the prior three years or are a qualified personal service corporation. The provided example firm has an accounting profit of $50,000.
Step-by-step explanation:
The student's question pertains to the exceptions that allow a corporation to use the cash method of accounting. Among the four options provided, two are correct per the latest IRS guidelines.
First, corporations with average gross receipts of $26 million or less over the prior three years can use the cash method.
This threshold has been updated from the older $5 million limit and may change again, so it's always a good idea to check the current IRS guidelines. Second, a qualified personal service corporation (QPSC) is also generally allowed to use the cash method of accounting regardless of its revenue.
As for the self-check question, the firm's accounting profit can be calculated by subtracting all the costs from the sales revenue. This would result in an accounting profit of $50,000, which is obtained by subtracting the total expenses ($600,000 + $150,000 + $200,000 = $950,000) from the sales revenue of $1 million.