Question
The following table illustrates the differences between a companys contract revenue and recognized revenue for a four-year contract. Contract revenue source Year 1 Year 2
The following table illustrates the differences between a companys contract revenue and recognized revenue for a four-year contract.
| Contract revenue source | Year 1 | Year 2 | Year 3 | Year 4 |
| Financial Statements | $40,000 | $0 | $0 | $0 |
| Tax Return | $10,000 | $10,000 | $10,000 | $10,000 |
Assume tax rates of 40% in Year 1 and 50% in all other years.
How much deferred income tax liability should the company recognize at the end of Year 1?
A. 12,000
B. 15,000
C. 16,000
D. 20,000
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Integrated Audit Practice Case
Authors: David S. Kerr, Randal J. Elder, Alvin A. Arens
5th Edition
0912503351, 9780912503356
