The DeVille Company reported pretax accounting income on its income statement as

Question

The DeVille Company reported pretax accounting income on its income statement as follows:
   

   
Included in the income of 2018 was an installment sale of property in the amount of $34,000. However, for tax purposes, DeVille reported the income in the year cash was collected. Cash collected on the installment sale was $13,600 in 2019, $17,000 in 2020, and $3,400 in 2021.

Included in the 2020 income was $12,000 interest from investments in municipal bonds.

The enacted tax rate for 2018 and 2019 was 30%, but during 2019 new tax legislation was passed reducing the tax rate to 25% for the years 2020 and beyond.

Required:
Prepare the year-end journal entries to record income taxes for the years 2018–2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

2018 $ 365,000 2019 285,000 2020 355,000 2021 395,000

Explanation / Answer

Solution:

Computaion of Taxable Income and Income tax Particulars 2018 2019 2020 2021 Pre tax Accounting Income $365,000.00 $285,000.00 $355,000.00 $395,000.00 Less: Income from installment sale to be recognized in future years $34,000.00 Add: Recognition of installment sales $13,600.00 $17,000.00 $3,400.00 Less: Interest on muncipal bonds $12,000.00 Taxable Income $331,000.00 $298,600.00 $372,000.00 $386,400.00 Tax Rate 30% 30% 25% 25% Income tax Payable $99,300.00 $89,580.00 $93,000.00 $96,600.00

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