HW question 3

Simmons Corporation had pretax income of $500,000 in 2024. For Simmons Company, the only difference between pretax income and taxable income for 2024 relates to a temporary difference which originated in 2024. Specifically, Simmons had a revenue from item #1 of $200,000 for financial reporting purposes in 2024; for income tax purposes the $200,000 of revenue from item #1 will be recognized over the years as the cash is collected as follows: $50,000 in 2024, $70,000 in 2025 and $80,000 in 2026. Simmons Corporation had pretax income of $600,000 in 2025. All temporary differences reversed as expected. The company complies with generally accepted accounting principles. The company expects pretax book income and taxable income in all years. The income tax rate is 40%. Required On its 12-31-2025 balance sheet, Simmons should report a deferred income tax Liability of $32,000 Asset of $80,000 Liability of $20,000 Liability of $80,000 Liability of S80,000 Asset of $28,000 Asset of $52,000 Liability of $60,000 Liability of S48,000 Liability of $52,000 Asset of $48,000 Asset of $32,000 Asset of $60,000 Asset of $20,000