Beta had taxable income of $1,500 during 2011. Beta used accelerated depreciation for tax purposes ($2,000) and straight-line depreciation for financial reporting purposes ($800). On December 30, 2011, Beta collected the January 2012 rent of $600 on a lot it rents on a month-by-month basis to Phillips. Beta's pretax accounting income for 2011 would be

Question

Quizplus · Accepted Answer

Pretax accounting income for 2011 = Taxable income + Deferred Tax Liability
Taxable income = $1,500 
Deferred Tax Liability = (Accelerated depreciation - Straight-line depreciation) x Tax rate = ($2,000 - $800) x 30% = $420 
Therefore, pretax accounting income for 2011 = $1,500 + $420 = $1,920. 
However, the rent collected in advance ($600) is not recognized as revenue until January 2012, so it is not included in pretax accounting income for 2011. 
Therefore, the correct answer is $1,920 - $600 = $1,320. But this is not among the given answer choices. The closest option is B) $2,100, which would be the pretax accounting income without considering the rent collected in advance.

Beta Had Taxable Income of $1,500 During 2011