Asked by Marco Bianchini on Jul 02, 2024
On January 1, 2010, Bedford Company began recognizing revenues from all sales under the accrual method for financial reporting purposes and under the installment sales method for income tax purposes.Bedford reported the following gross margin on sales for 2010 and 2011: AccualInstallment Year Method Sales Methoo 2010$1,200,000$1,000,00020111,800,0001,400,000\begin{array}{rrr}&\text {Accual}&\text {Installment}\\\text { Year }&\text { Method } &\text { Sales Methoo }\\2010 & \$ 1,200,000 & \$ 1,000,000 \\2011 & 1,800,000 & 1,400,000\end{array} Year 20102011Accual Method $1,200,0001,800,000Installment Sales Methoo $1,000,0001,400,000
The enacted tax rate for both 2010 and 2011 was 30%.Assuming there are no other temporary differences, Bedford's December 31, 2011 balance sheet would report a deferred tax liability of
A) $ 60, 000
B) $120, 000
C) $180, 000
D) $450, 000
Deferred Tax Liability
A tax obligation that arises when taxable income is delayed or postponed to future periods, reflecting taxes that are expected to be paid in the future.
Accrual Method
An accounting method that records revenues and expenses when they are earned or incurred, regardless of when the cash is received or paid.
Installment Sales Method
The installment sales method is an accounting technique used to recognize revenue and income on sales made through installment payments over time.
- Determine and log the deferred tax liabilities and assets.
- Comprehend the consequences of various revenue recognition approaches for taxation and financial reporting.
Learning Objectives
- Determine and log the deferred tax liabilities and assets.
- Comprehend the consequences of various revenue recognition approaches for taxation and financial reporting.