If gross profit on installment sales for tax purposes is less than gross profit on installment sales for accounting purposes by $65,000 and the tax rate is 20%,Income tax expense would be less than income taxes to pay by 65,000 x .20Income tax expense would be greater than income tax to pay by 65,000 x .20The current portion of income taxes would be more than income tax expense by 65,000 x .20The deferred tax liability for gross profit on installment sales would decrease by 65,000 x .20

Installment sale: This kind of sale involves a payment which could be allowed to pay over a period…

Answered: If gross profit on installment sales…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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If gross profit on installment sales for tax purposes is less than gross profit on installment sales for accounting purposes by $65,000 and the tax rate is 20%,
1. Income tax expense would be less than income taxes to pay by 65,000 x .20
2. Income tax expense would be greater than income tax to pay by 65,000 x .20
3. The current portion of income taxes would be more than income tax expense by 65,000 x .20
4. The deferred tax liability for gross profit on installment sales would decrease by 65,000 x .20

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