On January 1, 2010, Bedford Company began recognizing revenues from all sales under the accrual method for financial reporting purposes and under the installment sales method for income tax purposes.Bedford reported the following gross margin on sales for 2010 and 2011: $\begin{array}{rrr}
&\text {Accual}&\text {Installment}\
\text { Year }&\text { Method } &\text { Sales Methoo }\
2010 & \$ 1,200,000 & \$ 1,000,000 \
2011 & 1,800,000 & 1,400,000
\end{array}$
The enacted tax rate for both 2010 and 2011 was 30%.Assuming there are no other temporary differences, Bedford's December 31, 2011 balance sheet would report a deferred tax liability of

Question

On January 1, 2010, Bedford Company began recognizing revenues from all sales under the accrual method for financial reporting purposes and under the installment sales method for income tax purposes.Bedford reported the following gross margin on sales for 2010 and 2011: $\begin{array}{rrr}
&\text {Accual}&\text {Installment}\
\text { Year }&\text { Method } &\text { Sales Methoo }\
2010 & \$ 1,200,000 & \$ 1,000,000 \
2011 & 1,800,000 & 1,400,000
\end{array}$
 The enacted tax rate for both 2010 and 2011 was 30%.Assuming there are no other temporary differences, Bedford's December 31, 2011 balance sheet would report a deferred tax liability of

Quizplus · Accepted Answer

Bedford recognizes revenues under the accrual method for financial reporting purposes and under the installment sales method for income tax purposes, which creates a temporary difference. The installment sales method is a type of accounting method that recognizes revenue when cash payments are received, which differs from the accrual method that recognizes revenue when it is earned.

This temporary difference results in the recognition of deferred tax liabilities for the taxes payable in the future. The deferred tax liability is the amount of taxes that Bedford will be required to pay in the future for the difference between the two methods.

To calculate the deferred tax liability, we need to multiply the temporary difference by the enacted tax rate.

Temporary difference at the end of 2011 = Gross profit from installment sales method - Gross profit from accrual method 
= ($800,000 - $600,000) - ($1,000,000 - $800,000) 
= $200,000 - $200,000 
= $0

Since there is no temporary difference at the end of 2011, there will be no deferred tax liability.

However, the question suggests that there are no other temporary differences. If there were other temporary differences, then the deferred tax liability would need to be calculated for those as well.

Therefore, the correct answer is choice C) $180,000.

On January 1, 2010, Bedford Company Began Recognizing Revenues from All