What was Mosh’s gross taxable income for the current year?

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

Correct Answer: C
Explanation/Reference: Explanation:
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.

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