Times-Roman Publishing Company reports the following amounts In its first three

Question

Times-Roman Publishing Company reports the following amounts In its first three years of operation: $ In 000s) Pretax accounting $300 $280 $270 2016 2017 2018 Income Taxable Income 320 290 310 The difference between pretax accounting Income and taxable Income is due to subscription revenue for one-year magazine subscriptions belng 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 sltuation? Earned subscription O Unearned subscription 2. For each year, Indicate the cumulative amount of the temporary difference at year- end. (Enter your answers In thousands.) December 31 2016 2017 2018 Temporary difference

Explanation / Answer

1.

Subscription revenue for tax purpose - Recognized when received

Subscription revenue for accounting purpose - Recognized when earned

Earned subscription doesn't result in any difference as it is recognized for both accounting and tax purposes.

Unearned subscription is recognized only for tax purposes

The answer is - Unearnes subscription

2.

3.

4.

Deferred tax amounts are always non current as per GAAP

The answer is - non current

December 31 2016 2017 2018 Temporary difference 20 30 (10+20) 70 (40+30)

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