Refer to the facts in the preceding problem and assume that TPW uses the installment sale method of accounting.

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, compute PTR’s deferred tax asset or liability (identify which) resulting from the book/tax difference.

Data from Prob. 7

TPW, a calendar year taxpayer, sold land with a $535,000 tax basis for $750,000 in February. The purchaser paid $75,000 cash at closing and gave TPW an interest-bearing note for the $675,000 remaining price. In August, TPW received a $55,950 payment from the purchaser consisting of a $33,750 principal payment and a $22,200 interest payment.