Crane 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 $840000 Estimated litigation expense 2400000 Installment sales (1920000) Taxable income $1320000 The estimated litigation expense of $2400000 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 $960000 in each of the next two years. The estimated liability for litigation is classified as noncurrent and the installment accounts receivable are classified as $960000 current and $960000 noncurrent. The income tax rate is 20% for all years. The income tax expense is $168000. $960000. $480000. $264000.
Crane 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 $840000 Estimated litigation expense 2400000 Installment sales (1920000) Taxable income $1320000 The estimated litigation expense of $2400000 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 $960000 in each of the next two years. The estimated liability for litigation is classified as noncurrent and the installment accounts receivable are classified as $960000 current and $960000 noncurrent. The income tax rate is 20% for all years. The income tax expense is $168000. $960000. $480000. $264000.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Crane 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 | $840000 |
| Estimated litigation expense | 2400000 |
| Installment sales | (1920000) |
| Taxable income | $1320000 |
The estimated litigation expense of $2400000 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 $960000 in each of the next two years. The estimated liability for litigation is classified as noncurrent and the installment
The income tax expense is
$168000.
$960000.
$480000.
$264000.
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