Journal entries for deferred tax; draft income tax expense section
Not what you're looking for?
(One Temporary Difference, Tracked 3 Years, Change in Rates, Income Statement Presentation) Gators Corp. sold an investment on an installment basis. The total gain of $60,000 was reported for financial reporting purposes in the period of sale. The company qualifies to use the installment sales method for tax purposes. The installment period is 3 years; one-third of the sale price is collected in the period of sale. The tax rate was 35% in 2006, and 30% in 2007 and 2008. The 30% tax rate was not enacted in law until 2007. The accounting and tax data for the 3 years is shown below.
Financial Accounting Tax Return
2006 (35% tax rate)
Income before temporary difference $ 70,000 $70,000
Temporary difference 60,000 20,000
Income $130,000 $90,000
2007 (30% tax rate)
Income before temporary difference $ 70,000 $70,000
Temporary difference -0- 20,000
Income $ 70,000 $90,000
2008 (30% tax rate)
Income before temporary difference $ 70,000 $70,000
Temporary difference -0- 20,000
Income $ 70,000 $90,000
Instructions
1. Prepare the journal entries to record the income tax expense, deferred income taxes, and the income tax payable at the end of each year. No deferred income taxes existed at the beginning of 2006.
2. Explain how the deferred taxes will appear on the balance sheet at the end of each year. (Assume the Installment Accounts Receivable is classified as a current asset.)
3. Draft the income tax expense section of the income statement for each year, beginning with "Income before income taxes."
Purchase this Solution
Solution Summary
Journal entries for deferred tax are examined. Draft income tax expense sections are examined.
Purchase this Solution
Free BrainMass Quizzes
Team Development Strategies
This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.
Situational Leadership
This quiz will help you better understand Situational Leadership and its theories.
Understanding the Accounting Equation
These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.
Six Sigma for Process Improvement
A high level understanding of Six Sigma and what it is all about. This just gives you a glimpse of Six Sigma which entails more in-depth knowledge of processes and techniques.
MS Word 2010-Tricky Features
These questions are based on features of the previous word versions that were easy to figure out, but now seem more hidden to me.