Asked by Joshua Davis on Jul 08, 2024
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During its first year of operations a company recorded revenues totaling $6,000,000 for book purposes.For tax purposes,$2,400,000 of the revenue is taxable during the first year of operations and $3,600,000 is taxable during the second year of operations.The income tax rate for both years is 40%.The balance sheet at the end of the first year of operations will report a deferred tax liability of
A) $2,400,000.
B) $1,440,000.
C) $960,000.
D) $480,000.
Deferred Tax Liability
A tax obligation that a company owes but is not yet required to pay, resulting from temporary differences between the company's accounting and tax treatment of assets and liabilities.
Revenue
The total income generated by a company from its normal business operations.
Taxable
Pertaining to income or transactions subject to tax by governmental authorities.
- Gain a thorough understanding of the methods for calculating and reporting deferred income tax liabilities and assets.
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Learning Objectives
- Gain a thorough understanding of the methods for calculating and reporting deferred income tax liabilities and assets.
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