The Sample Corporation prepared the following income statements and income tax returns for Year 1 through Year 4.

Calculate the balance in the company’s deferred income tax liability account at the end of each year. Explain what a growing balance in the deferred income tax liability is likely to indicate about a company’s net income relative to its taxable income. Why might investment professionals view this situation positively? Negatively?

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Income Statement Sales.... Operating expenses. Pretax net income Provisions for income taxes Net income.... Year 1 Year 2 Year 3 Year 4 $1,000 $1,000 $1,000 $1,000 650 650 650 650 350 350 350 350 140 140 140 140 $ 210 $ 210 $ 210 $ 210