Question
Isaac Inc. began operations in January 2016. For certain of its property sales, Isaac recognizes income in the period of sale for financial reporting purposes.
Isaac Inc. began operations in January 2016. 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 2016, Isaac had $688 million in sales of this type. Scheduled collections for these sales are as follows: |
2016 | $75 million |
2017 | 131 million |
2018 | 149 million |
2019 | 165 million |
2020 | 168 million |
$688 million |
Assume that Isaac has a 30% income tax rate and that there were no other differences in income for financial statement and tax purposes. |
Suppose that, in 2017, legislation revised the income tax rates so that Isaac would be taxed in 2018 and beyond at 40%, rather than 30%. Assume that there were no other differences in income for financial statement and tax purposes. Ignoring operating expenses and additional sales in 2017, what deferred tax liability would Isaac report in its year-end 2017 balance sheet?
$145 million $167 million $193 million $275 million. |
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