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ACC 305 QUIZ 3 CHAPTER 19

ACC 305 QUIZ 3 CHAPTER 19

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Author: Christine Farr
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Mathis Co. at the end of 2014, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows:
Pretax financial income

$ 800,000

Estimated litigation expense

2,000,000

Installment sales

(1,600,000)

Taxable income

$ 1,200,000

The estimated litigation expense of $2,000,000 will be deductible in 2016 when it is expected to be paid. The gross profit from the installment sales will be realized in the amount of $800,000 in each of the next two years. The estimated liability for litigation is classified as noncurrent and the installment accounts receivable are classified as $800,000 current and $800,000 noncurrent. The income tax rate is 30% for all years.The deferred tax asset to be recognized is
Based on the following information, compute 2015 taxable income for South Co. assuming that its pre-tax accounting income for the year ended December 31, 2015 is $345,000.

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