Pharoah Co. at the end of 2020, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows: Pretax financial income Estimated litigation expense Installment sales Taxable income $1320000 O $256000. O $512000. O $392000. $128000. 3200000 (2560000) $1960000 The estimated litigation expense of $3200000 will be deductible in 2022 when it is expected to be paid. The gross profit from the installment sales will be realized in the amount of $1280000 in each of the next two years. The estimated liability for litigation is classified as noncurrent and the installment accounts receivable are classified as $1280000 current and $1280000 noncurrent. The income tax rate is 20% for all years. The deferred tax liability to be recognized is
Pharoah Co. at the end of 2020, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows: Pretax financial income Estimated litigation expense Installment sales Taxable income $1320000 O $256000. O $512000. O $392000. $128000. 3200000 (2560000) $1960000 The estimated litigation expense of $3200000 will be deductible in 2022 when it is expected to be paid. The gross profit from the installment sales will be realized in the amount of $1280000 in each of the next two years. The estimated liability for litigation is classified as noncurrent and the installment accounts receivable are classified as $1280000 current and $1280000 noncurrent. The income tax rate is 20% for all years. The deferred tax liability to be recognized is
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter18: Accounting For Income Taxes
Section: Chapter Questions
Problem 12P: Comprehensive Colt Company reports pretax financial income of 143,000 in 2019. In addition to pretax...
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![Pharoah Co. at the end of 2020, its first year of operations, prepared a reconciliation between pretax financial income and taxable
income as follows:
Pretax financial income
Estimated litigation expense
Installment sales
Taxable income
$1320000
O $256000.
O $512000.
O $392000.
$128000.
3200000
(2560000)
$1960000
The estimated litigation expense of $3200000 will be deductible in 2022 when it is expected to be paid. The gross profit from the
installment sales will be realized in the amount of $1280000 in each of the next two years. The estimated liability for litigation is
classified as noncurrent and the installment accounts receivable are classified as $1280000 current and $1280000 noncurrent. The
income tax rate is 20% for all years.
The deferred tax liability to be recognized is](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F174ee520-6e06-4abc-bf8d-bf6b3f400528%2F23438557-4510-40a1-a2c9-f6dd01983899%2F085xqbi_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Pharoah Co. at the end of 2020, its first year of operations, prepared a reconciliation between pretax financial income and taxable
income as follows:
Pretax financial income
Estimated litigation expense
Installment sales
Taxable income
$1320000
O $256000.
O $512000.
O $392000.
$128000.
3200000
(2560000)
$1960000
The estimated litigation expense of $3200000 will be deductible in 2022 when it is expected to be paid. The gross profit from the
installment sales will be realized in the amount of $1280000 in each of the next two years. The estimated liability for litigation is
classified as noncurrent and the installment accounts receivable are classified as $1280000 current and $1280000 noncurrent. The
income tax rate is 20% for all years.
The deferred tax liability to be recognized is
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