Question: For financial statement reporting Lexington Corporation recognizes royalty income in

For financial statement reporting, Lexington Corporation recognizes royalty income in the period earned. However, royalties are taxed when collected. At December 31, 2013, unearned royalties of $400,000 were included in Lexington’s balance sheet. All of these royalties had been collected in 2013. During 2014, royalties of $600,000 were collected. Unearned royalties in Lexington’s December 31, 2014, balance sheet amounted to $350,000. Assume that the income tax rate was 40%.

Required:
What amount should be reported as the deferred portion of the provision for income taxes in Lexington’s income statement for the year ended December 31, 2014?


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  • CreatedSeptember 10, 2014
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