At December 30, Year One, the Eighorn Corporation has net income(and taxable income) of $400,000….

At December 30, Year One, the Eighorn Corporation has net income(and taxable income) of $400,000. The company has an effective taxrate of 30 percent. Taxes have not yet been recorded. Then, on thelast day of the year, the company sells land that it bought severalyears ago for $70,000. The sales price is $300,000. The money willbe collected in Year Three. The company opts to use the installmentsales method to report this transaction for tax purposes. a. Whatdoes the company now report as its net income for Year One? b. Whenis the liability for the income tax on the gain on the sale of theland reported? Why is this timing appropriate?

 

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