Times-Roman Publishing Company reports the following amounts in its first three years of operation: ($ in 000s) 2016 2017 2018 $250 290 $240 $230 Pretax accounting income Taxable income 220 260 The difference between pretax accounting income and taxable income is due to subscription revenue for one-year magazine subscriptions being reported for tax purposes in the year received, but reported in the income statement in later years when earned. The income tax rate is 40% each year. Times-Roman anticipates profitable operations in the future. Required: 1. What is the balance sheet account for which a temporary difference is created by this situation? 2. For each year, indicate the cumulative amount of the temporary difference at year-end. 3. Determine the balance in the related deferred tax account at the end of each year. Is it a deferred tax asset or a deferred tax liability? 4. How should the deferred tax amount be classified and reported in the balance sheet?
Times-Roman Publishing Company reports the following amounts in its first three years of operation: ($ in 000s) 2016 2017 2018 $250 290 $240 $230 Pretax accounting income Taxable income 220 260 The difference between pretax accounting income and taxable income is due to subscription revenue for one-year magazine subscriptions being reported for tax purposes in the year received, but reported in the income statement in later years when earned. The income tax rate is 40% each year. Times-Roman anticipates profitable operations in the future. Required: 1. What is the balance sheet account for which a temporary difference is created by this situation? 2. For each year, indicate the cumulative amount of the temporary difference at year-end. 3. Determine the balance in the related deferred tax account at the end of each year. Is it a deferred tax asset or a deferred tax liability? 4. How should the deferred tax amount be classified and reported in the balance sheet?
Excel Applications for Accounting Principles
4th Edition
ISBN:9781111581565
Author:Gaylord N. Smith
Publisher:Gaylord N. Smith
ChapterMB: Model-building Problems
Section: Chapter Questions
Problem 12M
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Transcribed Image Text:Times-Roman Publishing Company reports the following amounts in its first three years of operation:
($ in 000s)
2016
2017
2018
$250
290
$240
$230
Pretax accounting income
Taxable income
220
260
The difference between pretax accounting income and taxable income is due to subscription revenue for
one-year magazine subscriptions being reported for tax purposes in the year received, but reported in the income
statement in later years when earned. The income tax rate is 40% each year. Times-Roman anticipates profitable
operations in the future.
Required:
1. What is the balance sheet account for which a temporary difference is created by this situation?
2. For each year, indicate the cumulative amount of the temporary difference at year-end.
3. Determine the balance in the related deferred tax account at the end of each year. Is it a deferred tax asset or a
deferred tax liability?
4. How should the deferred tax amount be classified and reported in the balance sheet?
Expert Solution
Follow-up Questions
Read through expert solutions to related follow-up questions below.
Follow-up Question
Times-Roman Publishing Company reports the following amounts in its first three years of operation:
| ($ in thousands) | 2021 | 2022 | 2023 | ||||||
| Subscription revenue recognized (earned) | $ | 250 | $ | 240 | $ | 230 | |||
| Subscription payments received in cash | 290 | 220 | 260 | ||||||
The difference between pretax accounting income and taxable income is due to subscription revenue for one-year magazine subscriptions being reported for tax purposes in the year received, but reported in the income statement in later years when the performance obligation is satisfied. The income tax rate is 25% each year. Times-Roman anticipates profitable operations in the future.
Required:
1. What is the balance sheet account that gives rise to a temporary difference in this situation?
2. Determine the amount of deferred subscription revenue at the end of each year. (Enter all amounts as positive values.)
3. Determine the balance in the related
|
Solution
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