Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

TPW, a calendar year taxpayer sold land with a $535,000 tax basis for $750,000 in February. The purchaser paid $75,000 cash at closing and gave

image text in transcribed

TPW, a calendar year taxpayer sold land with a $535,000 tax basis for $750,000 in February. The purchaser paid $75,000 cash at closing and gave TPW an interest-bearing note for the $675,000 remaining price. In August, TPW received a $55, 950 payment from the purchaser consisting of a $33, 750 principal payment and a $22, 200 interest payment. Assume that TPW uses the installment sale method of accounting. Compute the difference between TPW's book and tax income resulting from the installment sale method. (Round gross profit percentage to 2 decimal places, and intermediate calculations to the nearest whole dollar amount.) Book/tax difference Is this difference favorable or unfavorable? Favorable Unfavorable Using a 35 percent tax rate, compute PTR's deferred tax asset or liability (identify which) resulting from the book/tax difference. (Round your intermediate calculations and final answer to the nearest whole dollar amount.) Deferred tax liability TPW, a calendar year taxpayer sold land with a $535,000 tax basis for $750,000 in February. The purchaser paid $75,000 cash at closing and gave TPW an interest-bearing note for the $675,000 remaining price. In August, TPW received a $55, 950 payment from the purchaser consisting of a $33, 750 principal payment and a $22, 200 interest payment. Assume that TPW uses the installment sale method of accounting. Compute the difference between TPW's book and tax income resulting from the installment sale method. (Round gross profit percentage to 2 decimal places, and intermediate calculations to the nearest whole dollar amount.) Book/tax difference Is this difference favorable or unfavorable? Favorable Unfavorable Using a 35 percent tax rate, compute PTR's deferred tax asset or liability (identify which) resulting from the book/tax difference. (Round your intermediate calculations and final answer to the nearest whole dollar amount.) Deferred tax liability

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Information System Audit How To Control The Digital Disruption

Authors: Philippe Peret

1st Edition

1032136162, 978-1032136165

More Books

Students also viewed these Accounting questions

Question

Write down the Limitation of Beer - Lamberts law?

Answered: 1 week ago

Question

Discuss the Hawthorne experiments in detail

Answered: 1 week ago

Question

Explain the characteristics of a good system of control

Answered: 1 week ago

Question

State the importance of control

Answered: 1 week ago

Question

Explain key approaches to implementing LMD

Answered: 1 week ago