Lily is a cash method taxpayer who changes to the accrual method in 2016. Lily's...
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Accounting
Lily is a cash method taxpayer who changes to the accrual method in 2016. Lily's income computed under the accrual method for 2016 is $50,000. Her books show the following balances:
| 12/31/2015 | 12/31/2016 | |
| A/R | $20,000 | $33,500 |
| A/P | $7,500 | $4,200 |
a. What adjustment is necessary to Lily's income?
b. How should Lily report the adjustment?
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