S Company makes sales
Assume that S Company makes sales of $400,000 during 2004 and reports the amount as sales revenue on its income statement. Also assume that the company wishes to delay the reporting of a portion of that amount for tax purposes and uses the installment sales method for tax purposes. Assume that $100,000 of collections occurred during 2004, $150,000 occurred in 2005, and the remainder will occur in 2006. Assuming a tax rate of 40 percent, what is the amount of the entry into the Deferred Tax account at the end of the year 2004? $40,000 $60,000 $120,000 $160,000 4 points QUESTION 11 The Company purchases an asset on January 1, 2005, for $200,000. The straight-line method of depreciation is used for book purposes, resulting in depreciation of $50,000 per year. An accelerated method is used for tax purposes, resulting in depreciation of $80,000, $60,000, $40,000, and $20,000 for the years 2005, 2006, 2007, and 2008, respectively. Assume that the tax rate is 40 percent for all years and that depreciation is the only temporary difference between book and tax purposes. The 2005 journal entry would include a debit to Deferred Tax Liability of $12,000 debit to Deferred Tax Liability of $4,000 credit to Deferred Tax Asset of $4,000 credit to Deferred Tax Liability of $12,000 QUESTION 9 Rent income received in advance that is included for tax purposes when received, but recorded for book purposes when earned results in expense items and deductions being taken for tax purposes before book purposes expense items and deductions being recorded for book purposes before tax purposes purposes income being included for tax purposes before book income being recorded for book purposes before tax purposes.
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