The taxpayer had consistently used the cash method of accounting even though inventories were a material income-producing factor to its business. The taxpayer decided to voluntarily change to the accrual method of accounting. The adjustment to income due to the change was that the correct beginning balances for the year of the change as follows: $60,000 for inventories, $30,000 for accounts
receivable, and $12,000 for accounts payable. The adjustment due to the change in accounting method is:
a. A positive adjustment for $102,000.
b. A positive adjustment for $90,000.
c. A positive adjustment for $78,000.
d. A positive adjustment for $60,000.
e. None of the above.
c
RATIONALE: The adjustment to income is the increase in assets ($60,000 + $30,000), less the increase in liabilities ($12,000).
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