At the End of 2020, Its First Year of Operations

question 34

Multiple Choice

At the end of 2020, its first year of operations, Rinaldo Corp. prepared the following reconciliation between pre-tax accounting income and taxable income: $$\begin{array} { l r } \text { Pre-tax account ing income } & \$ 300,000 \\\text { Estimated lawsuit expense } & 750,000 \\\text { Instalment sales } & ( 600,000 ) \\\text { Taxable income } & \$ 450,000\end{array}$$ The estimated lawsuit expense of $ 750,000 will be deductible in 2022 when it is expected to be paid. The instalment sales will be realized at $ 300,000 in each of the next two years. The income tax rate is 30% for all years. The deferred tax asset to be recorded is

• A) $ 0.
• B) $ 45,000.
• C) $ 90,000.
• D) $ 225,000.

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Definitions:

Thomas Jefferson

The third President of the United States (1801-1809), principal author of the Declaration of Independence (1776), and one of the most influential Founding Fathers for his promotion of the ideals of republicanism in the United States.

John Adams

The second President of the United States (1797-1801), a Founding Father who played a leading role in independence from Britain and the drafting of the U.S. Constitution.

First Continental Congress

A convention of delegates from twelve of the thirteen American colonies in 1774, convened to respond to the British "Intolerable Acts."

Revolutionary War

The military conflict between Great Britain and its thirteen colonies in North America from 1775 to 1783, which resulted in the independence of the United States.