Refer to the facts in the preceding problem.
a. Compute the difference between TPW’s book and tax income resulting from the installment sale method.

b. Is this difference favorable or unfavorable?

c. Using a 21 percent tax rate, determine the effect of the difference on the deferred tax asset or liability generated in the year of sale.

Data from Prob. 9

Refer to the facts in problem 7. In the first year after the year of sale, TPW received payments totaling $106,900 from the purchaser. The total consisted of $67,500 principal payments and $39,400 interest payments.