Isaac Inc. began operations in January 2018. For certain of its property sales, Isaac recognizes income in the period of sale for financial reporting purposes. However, for income tax purposes, Isaac recognizes income when it collects cash from the buyer's installment payments. In 2018, Isaac had $600 million in sales of this type. Scheduled collections for these sales are as follows: Assume that Isaac has a 30% income tax rate and that there were no other differences in income for financial statement and tax purposes.
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Ignoring operating expenses, what deferred tax liability would Isaac report in its year-end 2018 balance sheet?

Question

Isaac Inc. began operations in January 2018. For certain of its property sales, Isaac recognizes income in the period of sale for financial reporting purposes. However, for income tax purposes, Isaac recognizes income when it collects cash from the buyer's installment payments. In 2018, Isaac had $600 million in sales of this type. Scheduled collections for these sales are as follows:  Assume that Isaac has a 30% income tax rate and that there were no other differences in income for financial statement and tax purposes.
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Ignoring operating expenses, what deferred tax liability would Isaac report in its year-end 2018 balance sheet?

Quizplus · Accepted Answer

Total future taxable income ($540 million) × tax rate of 30% = $162 million.

Isaac Inc Began Operations in January 2018