Hi I came across this question and I do not understand the solution.
Co A uses an accrual basis for financial reporting purposes and cash basis for tax purposes.
Cash collections are $476,000, and accrued revenue is only $376,000.
Assume expenses at 50% in both cases (i.e., $238,000 on cash basis and $188,000 on accrual basis), and a tax rate of 34%. What is the dta/dtl?
Part of the solution given is
taxable income ($238,000)
pretax income ($188,000). It states in the question that the company uses an accrual bais for financial reporting. DOES THIS MEAN I ONLY HAVE To TAKE NOTE OF THE ACCRUAL numbers when calculating the numbers in the financial reporting statements? No need to take into account the cash numbers?
I thought on the financial reporting statements it should be:
Revenue (476 000 + 376 000) 852 000
Less Expenses (238 000 + 188 000) (426 000)
Profit before Tax 426 000
Tax (34 %) (144 840)
Profit After Tax 281 160
THANKS SO MUCH!!!