financial recognized for financial reporti years. Scheduled collections for 2019

Question

financial recognized for financial reporti years. Scheduled collections for 2019-2021 are as follows Development began operations in December 2018. When lots for industrial development are sold, Diwon recognizes income for some lots, Dixon recognizes income for tax purposes when collected. Income ng purposes in 2018 for lots sold this way was $16 million, which will be collected over the next three reporting purposes in the year of the sale. For Dixon 714 2019 2020 7 sillion 2121 5 16 sillion Pretax accounting income for 2018 was $28 milion The enacted tax rate is 35% Required: t Assuming no defer ences between accounting incom e and taxable income other than those described above, prepare the journal Referencesentry to record income taxes in 2018 2. Suppose a new tax law, revising the tax rate from 35% to 30, begrring in 2020, is enacted in 209, when pretax accounting income was $26 million, No 2019 lot sales qualified for the special tax treatment. Prepare the appropriate journal entry to record ncome taxes in 2019 3. If the new tax rate had not been enacted, what would have been the appropriate balance in the deferred tax iability account at the end of 2019? Complete this question by entering your answers in the tabs below Required 1 Required 2Required 3 Assuming no differences between accounting income and taxable income other than those described above, prepare the journal entry to record income taxes in 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions reunded to 1 decimal place (., 5,300,000 should be Journal entry worksheet Recoed 2018 income taxes Dec 31, 2018

Explanation / Answer

1

Assuming there is no difference between accounting income and taxable income

other than those prescribed above

Particulars

$

Pre tax accounting income

$28 Million

Deduct: sale revenue from lot sales

($16 Million)

Add: collection from lot sales

0

Taxable income

$12 Million

Accounts and explanation

Debit $

Credit $

Tax expense (Bal.fig)

7

     Deferred tax liability [$16million*35%]

5.6

     Taxes Payable [$4Million*35%]

1.4

2

Suppose new tax law, revising the tax rate from 35% to 30%

Particulars

$

Pre tax accounting income

$26 Million

Deduct: sale revenue from lot sales

0

Add: collection from lot sales

$4 Million

Taxable income

$30 Million

Deffered tax Liability: [$16m *35%]- [(7m+5m)*30%] = $2 Million

Accounts and explanation

Debit $

Credit $

Tax expense (Bal fig)

8.5

Deffered tax liability

2

    Taxes Payable (30M *35%)

10.5

3

If the new tax rate had not been enacted, what would have been appropriate balance?

Deffered tax Liability: [$16m *35%]- [(7m+5m)*35%] = $1.4Million

1

Assuming there is no difference between accounting income and taxable income

other than those prescribed above

Particulars

$

Pre tax accounting income

$28 Million

Deduct: sale revenue from lot sales

($16 Million)

Add: collection from lot sales

0

Taxable income

$12 Million

Accounts and explanation

Debit $

Credit $

Tax expense (Bal.fig)

7

     Deferred tax liability [$16million*35%]

5.6

     Taxes Payable [$4Million*35%]

1.4

2

Suppose new tax law, revising the tax rate from 35% to 30%

Particulars

$

Pre tax accounting income

$26 Million

Deduct: sale revenue from lot sales

0

Add: collection from lot sales

$4 Million

Taxable income

$30 Million

Deffered tax Liability: [$16m *35%]- [(7m+5m)*30%] = $2 Million

Accounts and explanation

Debit $

Credit $

Tax expense (Bal fig)

8.5

Deffered tax liability

2

    Taxes Payable (30M *35%)

10.5

3

If the new tax rate had not been enacted, what would have been appropriate balance?

Deffered tax Liability: [$16m *35%]- [(7m+5m)*35%] = $1.4Million

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