AICPA CPA-Regulation Exam - Topic 1 Question 31 Discussion

Actual exam question for AICPA's CPA-Regulation exam

Question #: 31
Topic #: 1

Mosh, a sole proprietor, uses the cash basis of accounting. At the beginning of the current year, accounts receivable were $25,000. During the year, Mosh collected $100,000 from customers. At the end of the year, accounts receivable were $15,000. What was Mosh's gross taxable income for the current year?

A$75,000

B$90,000

C$100,000

D$110,000

Show Suggested Answer

Suggested Answer: C

Choice 'c' is correct. The facts state that cash collections from customers were $100,000 and as a cash basis taxpayer this is the amount of Mosh's gross taxable income for the year. Note that according to the formula BASE - we can determine the amount of sales = $90,000, but that would give us accrual, not cash basis, income.

Choice 'a' is incorrect. See Explanation: above.

Choice 'b' is incorrect. $90,000 is the amount of sales that would be Mosh's taxable income if Mosh were an accrual basis taxpayer.

Choice 'd' is incorrect. See Explanation: above.

by Roosevelt at May 08, 2022, 10:15 PM

Limited Time Offer

25%

Off

Get Premium CPA-Regulation Questions as Interactive Web-Based Practice Test or PDF

Contribute your Thoughts:

Submit Cancel

Melodie

4 months ago

So it's not $90,000 like I thought? Interesting!

upvoted 0 times

...

Hana

4 months ago

I thought it would be less than $100,000, but I guess not!

upvoted 0 times

...

Wava

4 months ago

Wait, how does accounts receivable affect cash basis?

upvoted 0 times

...

Adelle

4 months ago

I agree, it's definitely $100,000!

upvoted 0 times

...

Tonja

5 months ago

Gross income is based on cash collected, so it's $100,000.

upvoted 0 times

...

Claudio

5 months ago

I'm a bit unsure about this one. I'll need to review my notes on process capability indices to figure out the right approach.

upvoted 0 times

...

Ben

5 months ago

Okay, let's think this through. The server needs to be supported for several years, so that rules out non-LTS versions of Ubuntu. Red Hat Enterprise Linux is a good option, but it can be expensive. I think Ubuntu LTS is probably the safest bet here.

upvoted 0 times

...

Laquita

5 months ago

Ugh, interaction effects are the worst. I always get these types of questions mixed up. Let me re-read the question carefully and see if I can break it down step-by-step.

upvoted 0 times

...

Terina

5 months ago

I think the Skills Framework for the Information Age is the best answer here. From what I remember, COBIT uses that framework as a basis for guidance on the people, skills and competencies aspect of IT governance. I'll go with that.

upvoted 0 times

...