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
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Man.7
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
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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