In 2015 Charmed, Inc. recorded book income of $370,000. Thecompany's only temporary difference relates to a $60,000 installment sale that it recorded for book purposes; there are no permanent differences. Charmed anticipates receiving payments equally over the following three years. The current enacted tax rate in 2015 is 35%. The substantively enacted tax rates for the following three years are 30%, 35%, and 38%, respectively.
Under U.S. GAAP, what deferred tax amount should Charmed record for this temporary difference?
A.$21,000
B.$20,600
C.$21,600
D.$20,000

The temporary difference is a difference between carrying amount of an asset or liability in a Balance sheet and carrying amount of an asset or liability in its tax base. In the given scenario the temporary difference relates to installments sales which are $60,000 recorded in the book purpose. The tax base is different than the amount recorded in the company book. According to U.S. GAAP the deferred tax amount will be $60,000 * 35% which is current year tax rate.