Times-Roman Publishing Company reports the following amounts in its first three years of operation: ($ in thousands) 2021 2022 2023 Subscription revenue recognized (earned) $ 350 $ 360 $ 320 Subscription payments received in cash 390 340 360 The difference between pretax accounting income and taxable income is due to subscription revenue for one-year magazine subscriptions being reported for tax purposes in the year received, but reported in the income statement in later years when the performance obligation is satisfied. The income tax rate is 25% each year. Times-Roman anticipates profitable operations in the future. Required: 1. What is the balance sheet account that gives rise to a temporary difference in this situation
Unearned subscription revenue.
Tax is made on a cash basis which means that a transaction is eligible for taxation once cash has been paid for it. Businesses however have to use the Accrual basis which only record transactions in the period that they have been incurred.
In this scenario, there is more subscription payment in cash than the company recognized which means that the company has not yet delivered the service they were paid for and so could not recognize the subscriptions. They will however be taxed on those amounts because the cash has come in.
The account giving this temporary difference is therefore the Unearned Subscription Revenue account.
Therefore,the 90% confidence interval (a,b)
= ($681.93, $718.07)
b) 4. The interval contains historical data mean $690, which does not support the claim the mean cost has changed.
Confidence interval can be defined as a range of values so defined that there is a specified probability that the value of a parameter lies within it.
The confidence interval of a statistical data can be written as.
Mean x = $700
Standard deviation r = $65
Number of samples n = 35
Confidence interval = 90%
z(at 90% confidence) = 1.645
a. Develop a 90% confidence interval estimate for the mean audit cost.
Substituting the values we have;
Therefore,the 90% confidence interval (a,b) = ($681.93, $718.07)
b) Since, $690 is contained between the 90% confidence interval of ($681.93, $718.07). It implies that the mean cost has not changed.
4. The interval contains historical data mean $690, which does not support the claim the mean cost has changed.