Question

Isaac Inc. began operations in January 2021. For some property sales, Isaac recognizes income in the period of sale for financial reporting purposes. However, for income tax purposes, Isaac recognizes income when it collects cash from the buyer's installment payments. In 2021, Isaac had $621 million in sales of this type. Scheduled collections for these sales are as follows:

2021 $61 million
2022 121 million
2023 131 million
2024 152 million
2025 156 million
$621 million
Assume that Isaac has a 25% income tax rate and that there were no other differences in income for financial statement and tax purposes. Ignoring operating expenses and additional sales in 2022, what deferred tax liability would Isaac report in its year-end 2022 balance sheet?
a. $128 million.
b. $59 million.
c. $104 milion.
d. $8 million.

Answer 1

$109,750,000

Step-by-step explanation:

Note: Options provided in the question belong to similar question but different numbers

Deferred Tax liability = (Revenue from specific sales in 2021 - Cash received against it up to 2022) * Tax rate

Deferred Tax liability = ($621 million - $61 million - $121 million) * 25%

Deferred Tax liability = $439 million * 25%

Deferred Tax liability = $109,750,000