Asked by Kericia Halliday on Apr 29, 2024
Verified
Revenue from installment sales is recognized in the period received for tax purposes and recognized in the period earned for accounting purposes.If these periods are different, this is an example of a
A) permanent difference that gives rise to interperiod tax allocation
B) permanent difference that does not give rise to interperiod tax allocation
C) temporary difference that gives rise to interperiod tax allocation
D) temporary difference that does not give rise to interperiod tax allocation
Installment Sales Method
An accounting technique used to recognize revenue from sales when payments are received in installments over a period of time.
Tax Purposes
The reasons or motivations behind decisions or actions taken to comply with tax laws and regulations.
- Gain insight into how different methods of recognizing revenue affect both tax obligations and financial statements.
Verified Answer
AS
Anthony SandovalApr 30, 2024
Final Answer :
C
Explanation :
When revenue from installment sales is recognized in a different period for tax purposes and accounting purposes, it creates a temporary difference. This temporary difference will ultimately cause interperiod tax allocation, as the revenue recognized for accounting purposes will be taxed in a later period when it is recognized by the tax authority. Therefore, choice C is the best answer.
Learning Objectives
- Gain insight into how different methods of recognizing revenue affect both tax obligations and financial statements.
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