What is the expected balance in the deferred tax account

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Problem

In Year1, a company reported taxable pretax income of $200,000 and taxable income of $176,000. The only difference was due to an installment sale in Year1. For tax purposes, the $24,000 profit will be reported $10,000 in Year2 and $14,000 in Year3. The tax rate is currently 30% but it will increase to 40% in Year3.

1. Record the journal entry for taxes at the end of Year1.

2. What is the expected balance in the deferred tax account on the balance sheet at the end of Year2? Label it as a deferred tax asset or a deferred tax liability.

Reference no: EM131797244

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