Greenville Industries uses the accrual basis to account for all sales transactions. Sales for 2018 total $500,000. Included in this amount is $75,000 in receivables from sales on installment. Installment sales are considered revenue for book purposes, but not for tax purposes. Operating expenses total $140,000 and are treated the same for book and tax purposes. Assuming a 35% tax rate, what is Greenville's income tax payable?

Question

Quizplus · Accepted Answer

Greenville's taxable income is $500,000 - $75,000 (installment sales not recognized for tax) - $140,000 (operating expenses) = $285,000. The tax payable is 35% of $285,000, which is $99,750.

Greenville Industries Uses the Accrual Basis to Account for All