Rowen, Inc. had pre-tax accounting income of $1,672,000 and a tax rate of 40% in 2015, its first year of operations. During 2015 the company had the following transactions:Received rent from Jane, Co. for 2016$64,000Municipal bond income$80,000Depreciation for tax purposes in excess of book depreciation$40,000Installment sales revenue to be collected in 2016$108,000 6. At the end of 2015, which of the following deferred tax accounts and balances is reported on Rowen, Inc.’s balance sheet?AccountBalance a. Deferred tax asset$32,000 b. Deferred tax liability$32,000 c. Deferred tax asset$59,200 d. Deferred tax liability$59,200

Table showing the taxable summary Particulars GAAP Financial Statement IRS Tax return Installment Sales Income Income when received Rent Income when earned Income when received State and Municipal bond Interest Income Non-Taxable incomeCalculation of Deferred Tax Asset and liability Particulars Difference Deferred Tax Asset or liability Amount Taxable Amount Received rent from Jane, Co. for 2016 Temporary Deferred Tax Asset $64,000 x 40% ($25600) Municipal bond income Permanent Not Applicable Depreciation for tax purposes in excess of book depreciation Temporary Deferred Tax Liability $40,000 x 40% $16000 Installment sales revenue to be collected in 2016 Temporary Deferred Tax Liability $108000 x 40% $43200At the year end of 2015, deferred tax liability will be $ 59200 and deferred tax asset will be $ 25600 so the correct answer is d. Deferred tax liability $59,200

Answered: Rowen, Inc. had pre-tax accounting…

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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Rowen, Inc. had pre-tax accounting income of $1,672,000 and a tax rate of 40% in 2015, its first year of operations. During 2015 the company had the following transactions:

Received rent from Jane, Co. for 2016	$64,000
Municipal bond income	$80,000
Depreciation for tax purposes in excess of book depreciation	$40,000
Installment sales revenue to be collected in 2016	$108,000

6. At the end of 2015, which of the following deferred tax accounts and balances is reported on Rowen, Inc.’s balance sheet?

Account	Balance
a. Deferred tax asset	$32,000
b. Deferred tax liability	$32,000
c. Deferred tax asset	$59,200
d. Deferred tax liability	$59,200

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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