Pretax financial income $930000 Estimated litigation expense 2550000 Installment sales (2040000) Taxable income $1440000 The estimated litigation expense of $2550000 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 $1020000 in each of the next two years. The estimated liability for litigation is classified as noncurrent and the installment accounts receivable are classified as $1020000 current and $1020000 noncurrent. The income tax rate is 20% for all years. The deferred tax liability to be recognized is $408000. $204000. $102000. $288000.
Pretax financial income $930000 Estimated litigation expense 2550000 Installment sales (2040000) Taxable income $1440000 The estimated litigation expense of $2550000 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 $1020000 in each of the next two years. The estimated liability for litigation is classified as noncurrent and the installment accounts receivable are classified as $1020000 current and $1020000 noncurrent. The income tax rate is 20% for all years. The deferred tax liability to be recognized is $408000. $204000. $102000. $288000.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
31.
Oriole 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 | $930000 |
| Estimated litigation expense | 2550000 |
| Installment sales | (2040000) |
| Taxable income | $1440000 |
The estimated litigation expense of $2550000 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 $1020000 in each of the next two years. The estimated liability for litigation is classified as noncurrent and the installment
The
$408000.
$204000.
$102000.
$288000.
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