Blossom Co. at the end of 2020, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows: Pretax financial income Estimated litigation expense Installment sales Taxable income $140000 noncurrent. $1500000 O $140000 current. O $700000 noncurrent. $0. 3500000 The estimated litigation expense of $3500000 will be deductible in 2022 when it is expected to be paid. The gross profit from the installment sales will be realized in the amount of $1400000 in each of the next two years. The estimated liability for litigation is classified as noncurrent and the installment accounts receivable are classified as $1400000 current and $1400000 noncurrent. The income tax rate is 20% for all years. The deferred tax asset to be recognized is (2800000) $2200000

Blossom Co. at the end of 2020, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows: Pretax financial income Estimated litigation expense Installment sales Taxable income $140000 noncurrent. $1500000 O $140000 current. O $700000 noncurrent. $0. 3500000 The estimated litigation expense of $3500000 will be deductible in 2022 when it is expected to be paid. The gross profit from the installment sales will be realized in the amount of $1400000 in each of the next two years. The estimated liability for litigation is classified as noncurrent and the installment accounts receivable are classified as $1400000 current and $1400000 noncurrent. The income tax rate is 20% for all years. The deferred tax asset to be recognized is (2800000) $2200000

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter18: Accounting For Income Taxes

Section: Chapter Questions

Problem 12P: Comprehensive Colt Company reports pretax financial income of 143,000 in 2019. In addition to pretax...

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Concept explainers

Deferred Tax

Deferred tax is an estimated future tax which is made while preparing accounts. It is estimated as a result of past and present transactions in the financial statements. It is not the actual tax which needs to be paid or refundable from the revenue authority, it is an accounting entry. It exists because of the difference between accounting profits and taxable profits.

Question

Current Attempt in Progress
Blossom Co. at the end of 2020, its first year of operations, prepared a reconciliation between pretax financial income and taxable
income as follows:
Pretax financial income
Estimated litigation expense
Installment sales
Taxable income
$140000 noncurrent.
$1500000
3500000
O $140000 current.
O $700000 noncurrent.
O $0.
(2800000)
The estimated litigation expense of $3500000 will be deductible in 2022 when it is expected to be paid. The gross profit from the
installment sales will be realized in the amount of $1400000 in each of the next two years. The estimated liability for litigation is
classified as noncurrent and the installment accounts receivable are classified as $1400000 current and $1400000 noncurrent. The
income tax rate is 20% for all years.
The deferred tax asset to be recognized is
$2200000

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