Blossom Co. at the end of 2024, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows: Pretax financial income $1500000 Estimated litigation expense 3500000 Installment sales Taxable income (2820000) $2180000 The estimated litigation expense of $3500000 will be deductible in 2026 when it is expected to be paid. Gross profit of $1410000 from the installment sales will be realized in each of the next two years. The estimated liability for litigation is classified as noncurrent and the installment accounts receivable are classified as $1410000 current and $1410000 noncurrent. The income tax rate is 20% for all years. The deferred tax asset to be recognized at the end of 2024 is $0. $136000. $1750000. $700000.

Blossom Co. at the end of 2024, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows: Pretax financial income $1500000 Estimated litigation expense 3500000 Installment sales Taxable income (2820000) $2180000 The estimated litigation expense of $3500000 will be deductible in 2026 when it is expected to be paid. Gross profit of $1410000 from the installment sales will be realized in each of the next two years. The estimated liability for litigation is classified as noncurrent and the installment accounts receivable are classified as $1410000 current and $1410000 noncurrent. The income tax rate is 20% for all years. The deferred tax asset to be recognized at the end of 2024 is $0. $136000. $1750000. $700000.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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