6. [Analysis of deferred tax, CFA adapted] On December 29. 2000, Mother Prewitt's Handmade Cookies Corp acquires

Question:

6. [Analysis of deferred tax, CFA adapted] On December 29. 2000, Mother Prewitt's Handmade Cookies Corp acquires a nu- merically controlled chocolate chip-milling machine. Due to dif- ferences in tax and financial accounting, depreciation for tax purposes is $150,000 more than depreciation in the financial statements, adding $52.500 to deferred taxes At the same time. Mother Prewitt's sells $200,000 worth of cookies on an install- ment contract, recognizing the $100.000 profit immediately. For tax purposes, however, $80,000 of the profit will be recognized in 2001. requiring $27,200 of deferred taxes.

a. Compare the expected cash consequences of the two deferred tax items just described

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

The Analysis And Use Of Financial Statements

ISBN: 9780471375944

3rd Edition

Authors: Gerald I. White, Ashwinpaul C. Sondhi, Haim D. Fried

Question Posted: