Question

Edgar uses the cash method to report the income from his software consulting business. A large publicly held corporation has offered to invest in Edgar's business as a limited partner. Complete the statement below regarding the method of accounting for the new partnership.If the partnership's average annual gross receipts for the prior three-year period exceed $ it can use either the cash or accrual method of accounting .

Answer 1

The method Edgar and the Corporation requires is the accrual method, because it is a partnership between both of them and this method would be best for reporting of income

Step-by-step explanation:

Solution

It is a partnership with a corporate partner, for this it ill not put into consideration the method of cash accounting.

The partnership will be new or seen as new to both Edgar and the Corporation, what it would require is electing the accrual method of accounting.

Edgar should change accounting method from cash to accrual method for income reporting.