Times-Roman Publishing Company reports the following amounts in its first three years of operation: The difference between
Question:
Times-Roman Publishing Company reports the following amounts in its first three years of operation:
The difference between pretax accounting income and taxable income is due to subscription revenue for one-year magazine subscriptions being reported for tax purposes in the year received, but reported in the income statement in later years when earned. The income tax rate is 40% each year. Times-Roman anticipates profitable operations in the future.
Required:
1. What is the balance sheet account for which a temporary difference is created by this situation?
2. For each year, indicate the cumulative amount of the temporary difference at year-end.
3. Determine the balance in the related deferred tax account at the end of each year. Is it a deferred tax asset or a deferred tax liability?
4. How should the deferred tax amount be classified and reported in the balance sheet?
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Step by Step Answer:
Intermediate Accounting
ISBN: 978-0077400163
6th edition
Authors: J. David Spiceland, James Sepe, Mark Nelson