Answer:
WFO Corporation
Given WFO Corporation's annual gross receipts, which exceed $20 million, it is expected to use the accrual basis starting from Year 1, whether it is a C-Corporation or an S-Corporation.
Explanation:
a) Data and Calculations:
Gross Receipts:
Year 1 $22.00 million
Year 2 $24.00 million
Year 3 $26.00 million
Year 4 $24.50 million
Year 5 $25.00 million
Year 6 $27.00 million
b) For a C-Corporation, when the average gross receipts for the past three years exceed $5 million, the corporation is expected to change from cash basis to accrual basis. Assuming that WFO Corporation is an S-Corporation, it is expected to change to the accrual basis if its annual gross receipts exceed $10 million.
