6 Times-Roman Publishing Company reports the following amounts in its first thre

Question

6 Times-Roman Publishing Company reports the following amounts in its first three years of operation Pretax accounting income Taxable income $ 220 240 2019 200 200 2020 190 220 8.33 points 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 recelved, but reported in the Income statement In later years when the performance obligation is satisfied. The income tax rate is 40% each year. Times-Roman anticipates profitable operations in the future eBook 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. (Enter your answers In thousands.) 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? (Enter your answers In thousands.) Print References What is the balance sheet account for which a temporary difference is created by this situation? December 31 2018 2019 2020 2. Temporary ditference

Explanation / Answer

Solution:

Answer 1 : The balance sheet account for which a temporary difference is created by this situation is...

Answer 2 : The cumulative amount of the temporary difference at year-end:

Answer 3 : The balance in the related deferred tax account at the end of each year:

Deffered tax asset is cumulative difference multiplied by 40%

Answers:

1. Differed subscription revenue: It is an amount that was received by a company in advance of earning it. The amount unearned (and therefore deferred) as of the date of the financial statements should be reported as a liability.

Deffered subscription revenue.

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