Cullumber Corp. sold an investment on an installment basis. The total gain of $63,600 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 Financial Accounting Tax Return $74,200 $74,200 63,600 21,200 $137,800 $95,400 2026 (20% tax rate) Income before temporary difference $74,200 $74,200 Temporary difference 0 21.200

Cullumber Corp. sold an investment on an installment basis. The total gain of $63,600 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 Financial Accounting Tax Return $74,200 $74,200 63,600 21,200 $137,800 $95,400 2026 (20% tax rate) Income before temporary difference $74,200 $74,200 Temporary difference 0 21.200

SWFT Comprehensive Volume 2019

42nd Edition

ISBN:9780357233306

Author:Maloney

Publisher:Maloney

Chapter6: Deductions And Losses: In General

Section: Chapter Questions

Problem 56P

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In the current year, Madison Corporation had 50,000 of taxable income at a tax rate of 25%. During the year, Madison began offering warranties on its products and has a Warranty liability for financial reporting purposes of 5,000 at the end of the year. Warranty expenses are not deductible until paid for income tax purposes. Prepare the journal entry to record Madisons income taxes at the end of the year.
Greenville Industries uses the accrual basis to account for all sales transactions. Sales for 2022 total $500,000. Included in this amount is $70,000 in receivables from sales on installment. Installment sales are considered revenue for book purposes, but not for tax purposes. Operating expenses total $170,000 and are treated the same for book and tax purposes. Assuming a 40% tax rate, what is the amount of Greenville's deferred tax asset or liability? OA. $14,000 deferred tax liability B. $28,000 deferred tax liability OC. $28,000 deferred tax asset OD. $14,000 deferred tax asset
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