10.00 points MC Qu. 32 LO 16-05 Isaac Inc. began operations in January 2016. For

Question

10.00 points MC Qu. 32 LO 16-05 Isaac Inc. began operations in January 2016. For certain of Isaac Inc. began operations in January 2016. For certain of its property sales, Isaac recognizes income in the period of sale for financial reporting purposes. However, for income tax purposes, Isaac recognizes income when it collects cash from the buyers instalment payments. In 2016, Isaac had $632 million in sales of this type. Scheduled collections for these sales are as follows: 62 million 122 million 138 millior 153 million 2016 2018 2020 632 million Assume that Isaac has a 24% income tax rate and that there were no other differences in income fo statement and tax purposes Suppose that in 2017, legislation revised the income tax rates so that Isaac would be taxed in 2018 and beyond at 34%, rather than 24%, Assume that there were no other diferences n income or inancial statement and tax purposes ignoring operating expenses and additional sales in 2017, what deferred tax lability wouid Isaac report in ts year-end 2017 balance sheet? (Round your answer to the nearest whole $108 million O $152 million O $122 miltion O $215 millon. Multiple Cholce CL 320e-0s sast ine/began operations in 2016 Fo certailYot its TOSHIBA esc 2 3 4 5

Explanation / Answer

2016 2017 2018 2019 2020 Revenue in Financial reporting 632 Revenue for tax purposes 62 122 138 153 157 Difference 570 -122 -138 -153 -157 Net timing differences 570 448 310 157 0 Tax rate 24% 34% 34% 34% 34% Deferred tax liability at the end of the year 136.8 152.32 105.4 53.38 0 So, at the end of 2017 deferred tax liability will be reported at 152 Million The correct alternative is 2

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