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ChoGyi
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Joined: 25 Jun 2012
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| Posted: 25 Jun 2012 at 19:10 | IP Logged
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Huff Corp. began operation on Jan 1, yr 1. It recognizes revenues from all sales under the accrual method for financial reporting purposes and appropriately uses the installment method for income tax purposes. Huff's gross margin on installment sales under each method was as follows:
Year, Accrual,Installment
1, 800,300
2, 1300,700
Enacted income tax rates are 30% from year 2 and 25% thereafter. There are no other temporary differences, In huff's dec 31. yr 2 balance sheet, the deferred income tax liability should be :
a. 150
b. 180
c. 275
d. 330
My calculation for this problem is :
(800-300)*.30 = 150
(1300-700)*.25= 150
so my answer is 300. Apparently, it was wrong. I couldn't figure out why it uses 25%. Would anyone explain it to me? THANKS!
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wool1
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| Posted: 25 Jun 2012 at 19:26 | IP Logged
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What's the answer, 150?
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ChoGyi
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| Posted: 25 Jun 2012 at 19:42 | IP Logged
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the correct answer is 275.
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LamJason
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| Posted: 13 Jul 2012 at 17:55 | IP Logged
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I guess because the tax liability is calculated using the tax rate of the period when you will actually have to pay the tax
in this case, when you pay the tax in the future period, the tax rate will be 25%
http://www.cpanet.com/cpa_forum/forum_posts.asp?TID=28279&am p;get=last
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