10.00 points · MC Qu. 31 LO 16-01 Isaac Inc. began operations in January 2016. F

ID: 2511767 • Letter: 1

Question

10.00 points · MC Qu. 31 LO 16-01 Isaac Inc. began operations in January 2016. For certain of its... saac Inc began operations in January 2016 For certain of its property sales, lsaac recognizes income in the period of sale for financial reporting purposes. However, for income tax purposes, Isaac recognizes income when it collects cash from the buyer's instalinent payments In 2016, Isaac had $632 milion in sales of this type Scheduled collections for these sales are as follows 2016 2 million 2019 2020 157 million 632 million Assume that isaac has a 33% income tax rate and that there were no other diferences in income to imanca statement and tax purposes Ignoring operating expenses and additional sales in 2017, what deferred tax lability would Isaac report in its year-end 2017 balance sheet? (Round your answer to the nearest whole millilon) O $168 million O $61 million O $148 milion O $209 million Murtiple Cholce Me Qu 31LO 16-01 Isauc Inc began-operations in Aandary 20 For certairy ofits TOSHIBA esc 2 3 4 5 9

Explanation / Answer

Deffered Tax Liability is recorded in the books when the tax due according to tax accounting is lower than according to financial accounting.

Financial Account

Tax Accounting

Time Difference

Tax Rate

Deferred Tax Liability

Income in 2016

632 Million

62 Million

570 Million

33%

$188 Million

Income in 2017

122 Million

448 Million

33%

$148 million

In 2016 Company is recorded the Deferred Tax Liability = $188 Million

In 2017 Company will record reversal of DTA (122 Million x Tax Rate 33%) = 40 Million

So, the company should report Deferred Tax Liability in its year end 2017 balance sheet = $188 - $40 = $148 million

Hence, the correct option is $148 million

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