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from the local refinery, and payments for all invoices are made
by an automatic draft from petitioner’s checking account on the
10th day following any purchase. All invoices for the sale of
products to customers by petitioner use a 10-day net collection
period.
Richard and Vivian Cross, who together own 100 percent of
petitioner, incorporated the business from a sole proprietorship
in 1978. Petitioner has maintained its books and records using
the cash or hybrid method of accounting since its incorporation.
Petitioner has reported its income for Federal tax purposes using
the cash method of accounting.
Petitioner’s financial information is summarized in the
following charts. Petitioner’s ending inventory, gross sales,
and percentages of ending inventory to gross sales are as
follows:
Percentage of
Ending Gross Ending Inventory
Year Ended Inventory Sales to Gross Sales
June 30, 1996 $104,148 $2,119,386 4.91
June 30, 1997 96,513 2,590,025 3.73
Petitioner’s purchases, gross receipts, and percentages of
purchases to gross receipts are as follows:
Percentage of
Purchases
Gross to Gross
Year Ended Purchases Receipts Receipts
June 30, 1996 $1,765,594 $2,119,386 83
June 30, 1997 2,288,090 2,590,025 88
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Last modified: May 25, 2011