financial recognized for financial reporti years. Scheduled collections for 2019
ID: 2539747 • Letter: F
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 $26 million, No 2019 lot sales qualified for the special tax treatment. Prepare the appropriate journal entry to record ncome taxes in 2019 3. If the new tax rate had not been enacted, what would have been the appropriate balance in the deferred tax iability account at the end of 2019? Complete this question by entering your answers in the tabs below Required 1 Required 2Required 3 Assuming no differences between accounting income and taxable income other than those described above, prepare the journal entry to record income taxes in 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions reunded to 1 decimal place (., 5,300,000 should be Journal entry worksheet Recoed 2018 income taxes Dec 31, 2018Explanation / Answer
Part 1:
Amount ($'m)
Amount ($'m)
Pre-tax accounting income for 2018
28
Less: Amount credited but to be collected in later years
2019
4
2020
7
2021
5
16
12
Tax rate
35%
Income tax liability
4.2
(12m X 35%)
Date
Description
Debit ($)
Credit ($)
Profit and loss Account
4.2
Provision for income tax
4.2
(Being provision for income tax made)
Part 2:
Amount ($'m)
Amount ($'m)
Pre-tax accounting income for 2019
26
Add: Lot of sales of 2019
4
(2019 lot)
30
Tax rate
30%
Tax liability
9
(30m X 30%)
Date
Description
Debit ($)
Credit ($)
Profit and loss Account
9
Provision for income tax
9
(Being provision for income tax made)
Part 3
Lot of sales for 2020
7m
Lot of sales for 2021
5m
Total sales lot
12m
Difference in rate of tax
Earlier
35%
Now
30%
Deferred tax liability ($'m)
3.6
Part 1:
Amount ($'m)
Amount ($'m)
Pre-tax accounting income for 2018
28
Less: Amount credited but to be collected in later years
2019
4
2020
7
2021
5
16
12
Tax rate
35%
Income tax liability
4.2
(12m X 35%)
Date
Description
Debit ($)
Credit ($)
Profit and loss Account
4.2
Provision for income tax
4.2
(Being provision for income tax made)
Part 2:
Amount ($'m)
Amount ($'m)
Pre-tax accounting income for 2019
26
Add: Lot of sales of 2019
4
(2019 lot)
30
Tax rate
30%
Tax liability
9
(30m X 30%)
Date
Description
Debit ($)
Credit ($)
Profit and loss Account
9
Provision for income tax
9
(Being provision for income tax made)
Part 3
Lot of sales for 2020
7m
Lot of sales for 2021
5m
Total sales lot
12m
Difference in rate of tax
Earlier
35%
Now
30%
Deferred tax liability ($'m)
3.6
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