On December 31, 2017, XYZ Inc. has an account receivable of $2,000 for consulting fees it earned during the year. Consulting revenues are only taxable when collected. XYZ normally receives payment for the services rendered one month after the client is invoiced. Assuming a 20% tax rate, these revenues shall result in:
John Inc and Victor Inc. formed a joint venture on January 1, 2016. John invested plant and equipment with a book value of $500,000 and a fair value of $800,000 for a 30% interest in the venture which was to be called Jinxtor Ltd. Victor contributed assets with a fair value of $2,000,000 (including $200,000 in cash) for its 70% stake in Jinxtor. Jinxtor reported a net income of $3,000,000 for 2016. John's plant and equipment were estimated to provide an additional 5 years of utility to Jinxtor. The transactions set out above were considered to be of commercial substance.
A) a deferred tax asset of $2,000.
B) a deferred tax asset of $400.
C) a deferred tax liability of $2,000.
D) a deferred tax liability of $400.
D) a deferred tax liability of $400.
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