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Financial income and taxable income




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.;7. Compute the income tax expense;8. Compute the deferred tax asset. Show all computations.;9. Compute the deferred tax liability. Show all computations.


Paper#26691 | Written in 18-Jul-2015

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