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In Year 1, Warren Company includes $50,000 of installment sales income on its income statement. $25,000 will be collected in Year 2 and $25,000 in Year 3 and will be reported on the tax return when collected. The enacted tax rate is 40%. What amount of deferred tax liability does Warren report at the end of Year 1

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anthougo

The amount of deferred tax liability that Warren Company reports at the end of Year 1 is $20,000.

What is deferred tax liability?

Deferred tax liabilities arise from taxes to be paid in the future when future taxable amounts become taxable or when the temporary differences reverse.

Data and Calculations:

Installment sales included in income statement = $50,000

Collection of installment sales:

Year 2 = $25,000

Year 3 = $25,000

Tax rate = 40%

Deferred tax liability based on installment sales = $20,000 ($50,000 x 40%)

Thus, the amount of deferred tax liability that Warren Company reports at the end of Year 1 is $20,000.

Learn more about deferred tax liability at https://brainly.com/question/16102904

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