405quiz3summer2011solution

- Computations below Mathis Co at the end of 2010 its first year of operations prepared a reconciliation between pretax financial income and

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Computations below. Mathis Co. at the end of 2010, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows: Pretax financial income $ 500,000 Estimated litigation expense 1,250,000 Installment sales (1,000,000 ) Taxable income $ 750,000 The estimated litigation expense of $1,250,000 will be deductible in 2012 when it is expected to be paid. The gross profit from the installment sales will be realized in the amount of $500,000 in each of the next two years. The estimated liability for litigation is classified as noncurrent and the installment accounts receivable are classified as $500,000 current and $500,000 noncurrent. The income tax rate is 30% for all years. 1. The income tax expense is a. $150,000. b. $225,000. c. $250,000. d. $500,000. 2. The deferred tax asset to be recognized is a. $0. b. $75,000 current. c. $375,000 current. d.
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This note was uploaded on 11/05/2011 for the course ACCT 405 taught by Professor Caylor during the Summer '11 term at South Carolina.

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- Computations below Mathis Co at the end of 2010 its first year of operations prepared a reconciliation between pretax financial income and

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