Karr, Inc. uses the accrual method of accounting for financial reporting purposes and appropriately uses the installment method of accounting for income tax purposes. Installment income of $900,000 will be collected in the following years when the enacted tax rates are: The installment income is Karr's only temporary difference. What amount should be included in the deferred income tax liability in Karr's December 31, 2007 balance sheet?

Question

Karr, Inc. uses the accrual method of accounting for financial reporting purposes and appropriately uses the installment method of accounting for income tax purposes. Installment income of $900,000 will be collected in the following years when the enacted tax rates are:  The installment income is Karr's only temporary difference. What amount should be included in the deferred income tax liability in Karr's December 31, 2007 balance sheet?

Quizplus · Accepted Answer

($180,000 × 30%) + ($270,000 × 30%) + ($360,000 × 25%) = $225,000.

Karr, Inc Uses the Accrual Method of Accounting for Financial Reporting