Isaac Inc. began operations in January 2013. For certain of its property sales,

Question

Isaac Inc. began operations in January 2013. For certain of its property sales, Isaac 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 installment payments.

In 2013, Isaac had $642 million in sales of this type. Scheduled collections for these sales are as follows:

162 million

$642 million

Assume that Isaac has a 29% income tax rate and that there were no other differences in income for financial statement and tax purposes.

Ignoring operating expenses, what deferred tax liability would Isaac report in its year-end 2013 balance sheet? (Round your answer to the nearest whole million.)

Isaac Inc. began operations in January 2013. For certain of its property sales, Isaac 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 installment payments.

Explanation / Answer

what deferred tax liability would Isaac report in its year-end 2013 balance sheet? (Round your answer to the nearest whole million.)

Temperory difference in Income = $ 642 Million - 71 Million = $ 571 Million

Deferred tax liability = Temperory difference in Income *Tax rate

Deferred tax liability = 571*29%

Deferred tax liability = $ 165.59 Million

Deferred tax liability = $ 166 Million ( Rounded to nearest whole million)

Answer

b) $166 million

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