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Blossom Corp. sold an investment on an installment basis. The total gain of $87,600 was reported for financial reporting purposes in the period of sale. The company qualifies to use the installment-sales method for tax purposes. The installment period is 3 years; one- third of the sale price is collected in the period of sale. The tax rate was 40% in 2025, and 20% in 2026 and 2027. The 20% tax rate wa not enacted in law until 2026. The accounting and tax data for the 3 years is shown below. 2025 (40% tax rate). Income before temporary difference Temporary difference Income 2026 (20% tax rate). Income before temporary difference Temporary difference Income 2027 (20% tax rate) Income before temporary difference Temporary difference Income Financial Accounting $102,200 87,600 $189,800 $102,200 0 $102,200 $102,200 0 $102,200 Tax Return $102,200 29,200 $131,400 $102,200 29,200 $131,400 $102,200 29,200 $131,400

Blossom Corp. sold an investment on an installment basis. The total gain of $87,600 was reported for financial reporting purposes in the period of sale. The company qualifies to use the installment-sales method for tax purposes. The installment period is 3 years; one- third of the sale price is collected in the period of sale. The tax rate was 40% in 2025, and 20% in 2026 and 2027. The 20% tax rate wa not enacted in law until 2026. The accounting and tax data for the 3 years is shown below. 2025 (40% tax rate). Income before temporary difference Temporary difference Income 2026 (20% tax rate). Income before temporary difference Temporary difference Income 2027 (20% tax rate) Income before temporary difference Temporary difference Income Financial Accounting $102,200 87,600 $189,800 $102,200 0 $102,200 $102,200 0 $102,200 Tax Return $102,200 29,200 $131,400 $102,200 29,200 $131,400 $102,200 29,200 $131,400

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Blossom Corp. sold an investment on an installment basis. The total gain of $87,600 was reported for financial reporting purposes in the period of sale. The company qualifies to use the installment-sales method for tax purposes. The installment period is 3 years; one- third of the sale price is collected in the period of sale. The tax rate was 40% in 2025, and 20% in 2026 and 2027. The 20% tax rate was not enacted in law until 2026. The accounting and tax data for the 3 years is shown below. 2025 (40% tax rate). Income before temporary difference Temporary difference Income 2026 (20% tax rate). Income before temporary difference Temporary difference Income 2027 (20% tax rate) Income before temporary difference Temporary difference Income Financial Accounting $102,200 87,600 $189,800 $102,200 0 $102,200 $102,200 0 $102,200 Tax Return $102,200 29,200 $131,400 $102,200 29,200 $131,400 $102,200 29,200 $131,400
Transcribed Image Text:Blossom Corp. sold an investment on an installment basis. The total gain of $87,600 was reported for financial reporting purposes in the period of sale. The company qualifies to use the installment-sales method for tax purposes. The installment period is 3 years; one- third of the sale price is collected in the period of sale. The tax rate was 40% in 2025, and 20% in 2026 and 2027. The 20% tax rate was not enacted in law until 2026. The accounting and tax data for the 3 years is shown below. 2025 (40% tax rate). Income before temporary difference Temporary difference Income 2026 (20% tax rate). Income before temporary difference Temporary difference Income 2027 (20% tax rate) Income before temporary difference Temporary difference Income Financial Accounting $102,200 87,600 $189,800 $102,200 0 $102,200 $102,200 0 $102,200 Tax Return $102,200 29,200 $131,400 $102,200 29,200 $131,400 $102,200 29,200 $131,400
Calculate cumulative temporary differences for years 2025-2027. (Negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Cumulative temporary difference Current tax Calculate current tax expense for years 2025-2027. Current tax Current tax Deferred tax $ Deferred tax Deferred tax ✓for 2025 $ Calculate deferred tax expense for 2025-2027. for 2026 $ ✓for 2027 $ for 2025 ✓ for 2026 for 2027 $ $ 2025 $ $ 2026 $ 2027
Transcribed Image Text:Calculate cumulative temporary differences for years 2025-2027. (Negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Cumulative temporary difference Current tax Calculate current tax expense for years 2025-2027. Current tax Current tax Deferred tax $ Deferred tax Deferred tax ✓for 2025 $ Calculate deferred tax expense for 2025-2027. for 2026 $ ✓for 2027 $ for 2025 ✓ for 2026 for 2027 $ $ 2025 $ $ 2026 $ 2027
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